Can an IFA insist on commission?

Reaper

Mrs Reaper is joining her company pension scheme. It's a money purchase thing and the IFA says their contract is with the company and it has been agreed it will always be on a commission basis.

However it is Mrs Reaper who will be signing the contract and Mrs Reaper who will be putting in the lion's share of the monthly contributions. Surely the contract is between her and the pension company in which case can she not choose a fixed fee basis for the IFA instead?

opinions4u

It's a company scheme, so it's up to the company to agree the terms.

If she doesn't like it, wander over to the local fee accepting IFA and set up a pension there.

Looks like a trade off between what the %ge deduction commissions are against the investment potential and size of contribution the company is making.

TEDDYRUKSPIN

Reaper, why does that sound like one of your exam questions? LOL.............

Anyway, don't know why people moan about IFA's getting paid a commission. They must somehow get paid.

Reaper

No, not an exam question, I'm no IFA (though I used to be LAUTRO authorised).

I wasn't sure that it really was a company scheme. It sounds to me more like she sets up a pension and they contribute to it while she is employed and stop contributing when she leaves.

She had been considering making a substantial contribution herself but that makes the commission rate so high (for no extra work) that she would be better off paying in the minumum and setting up a second pension via Cavendish Online such that the commission gets added into the pot too.

To avoid the faff I thought a fixed fee basis was a simple solution where everybody gets a fair cut.

opinions4u

Reaper wrote: »

I wasn't sure that it really was a company scheme. It sounds to me more like she sets up a pension and they contribute to it while she is employed and stop contributing when she leaves.

Would they (her company) match or part match any lump sum contribution? If so, does the matching amount exceed the commission deduction made on her own contribution?

To avoid the faff I thought a fixed fee basis was a simple solution where everybody gets a fair cut.

I suspect the company will also be getting a kick back from the IFA as part of this arrangement, so "fair" doesn't necessarily come in to it.

Key questions:

Is the type of investment made by the fund appropriate?

Does the company contribution exceed any commission deduction?

If you answer "yes" to both then I'd stick with the company scheme, unless there are any other hidden rules not disclosed in the post.

dunstonh

group personal pensions/stakeholders, COMPs and CIMPs all have the remuneration method and amounts agreed with the company owner.

Its a pain for IFAs as well. There is a large local employer here who operates a GPPP and i have told people to join it many times. I do all the work, the fund recommendations etc and the IFA that controls the scheme gets paid for it, not me. Yet they have done nothing.

whiteflag_3

Reaper wrote: »

No, not an exam question, I'm no IFA (though I used to be LAUTRO authorised).

I wasn't sure that it really was a company scheme. It sounds to me more like she sets up a pension and they contribute to it while she is employed and stop contributing when she leaves.

She had been considering making a substantial contribution herself but that makes the commission rate so high (for no extra work) that she would be better off paying in the minumum and setting up a second pension via Cavendish Online such that the commission gets added into the pot too.

To avoid the faff I thought a fixed fee basis was a simple solution where everybody gets a fair cut.

What are the charges on the GPP?

What would be the charges on the Cavendish plan?

As has been posted many times here, commission and charges completely separate items and should be viewed individually.

I deal with GPPs with AMCs as low as 0.35% per annum that still pay commission.

Please reply and your query can be answered quite easily.

whiteflag_3

opinions4u wrote: »

I suspect the company will also be getting a kick back from the IFA as part of this arrangement, so "fair" doesn't necessarily come in to it.

I think you suspect incorrectly. Ive been involved with GPPs for 15years and have yet to come accross a company where a "kick back " has been arranged. How would such an arrangement work?

opinions4u

whiteflag wrote: »

I think you suspect incorrectly. Ive been involved with GPPs for 15years and have yet to come accross a company where a "kick back " has been arranged. How would such an arrangement work?

Company wishes to run a pension scheme and opens up the bidding for firms to administer various elements of it.

Successful bidder pays money to the company.

EDIT: Bidder makes money from commission payments etc made after getting the contract.

whiteflag_3

opinions4u wrote: »

Company wishes to run a pension scheme and opens up the bidding for firms to administer various elements of it.

Successful bidder pays money to the company.

Have you come across a real life situation , cause i havent and I have have worked for a national firm of benefit consultants and a major IFA in the group market and ive never seen it.

In practical terms how would it go through the comapny accounts? Isnt it normal for the company providing the service to charge the client and not the other way round.

Reaper

whiteflag wrote: »

What are the charges on the GPP?

What would be the charges on the Cavendish plan?

As has been posted many times here, commission and charges completely separate items and should be viewed individually.

I deal with GPPs with AMCs as low as 0.35% per annum that still pay commission.

Please reply and your query can be answered quite easily.

I have no problems with the charges, they are low provided you stick with the default boring passive fund (1%). But when I see over £1500 lump sum and over £200pa going to the IFA I can't help but think why not go via Cavendish? They charge just a one off £35 and all the commission is re-invested for any pension from whoever you want it with.

I think the best thing to do is to accept the company scheme but pay the minimum into it to qualify for the employer to contribute, then take out a similar one via Cavendish for the extra she wants to contribute. It's not like we asked for or need financial advice from the IFA.