ISA charges alert

whiteflag_3

cheerfulcat wrote:

An ISA is not a product, as you well know; it is a tax " wrapper " and as such of course it should be used - it would be daft not to. FWIW had the hypothetical client not had a pension I would have suggested one of those as well...



For nothing???The advisor gets paid five years' worth of fees in advance, for Heavens' sake!

Yes but five years worth of charges dont come out of the plan at the start!

Can you not see that with my way there is every incentive for me to do my very best for the client, knowing that if his investment underperforms he might not come back and I don't get paid?

I think there is equally the same incentive for the other IFA to service his client as well.
Whereas with the Sterling version, there is every incentive for the IFA to encourage the client to keep the product regardless of its suitability and performance because if he doesn't, the IFA has to return the money. Then too there is the considerable drag on returns created by such a massive up front commission...incidentally,

But if there were no fees charged by you these could be reinvested boosting returns
"I most certainly do not concede that advice has to be paid for; you put me in a hypothetical situation and I responded from the point of view of an IFA.

I didnt expect you to concede advice has to be paid for> i asked you to put yourself in the position of the IFA who is asked for advice. What is he meant to do? . HIs job is to offer advice and the client is asking for advice.

EdInvestor

It's pretty obvious why increasing numbers of people prefer websites, isn't it?

"Advice" is just too expensive.

You've priced yourselves out of the market, except for the very well off.

whiteflag_3

EdInvestor wrote:

It's pretty obvious why increasing numbers of people prefer websites, isn't it?

"QUOTE]

yes im sure theres a lot more people using the net than 10 years ago! :rotfl:

cheerfulcat

whiteflag, you still haven't answered my original question, which you said you would if I answered yours -

cheerfulcat wrote:

The article which started this rumpus was focussing on the apparent fact that this product pays the advisor five years' worth of commission up front, repayable if the client stops the regular investments; I would be interested to see what our resident IFAs have to say about that. For the record, I think that it's disgraceful; it gives the advisor every incentive to keep his or her client in a possibly unsuitable product.

whiteflag_3

cheerfulcat wrote:

whiteflag, you still haven't answered my original question, which you said you would if I answered yours -

I thought I answered your previous post above.

Can you explain why you think the choice of commission option with the Sterling product has an impact on the plan. Way back I posted the reduction in yields and they are the same for the indemnity and level commission?

I fail to see why an adviser being paid for the advice they give is disgraceful.

dunstonh

I agree with whiteflag. Although I personally think that indemnity commission should only be allowed for new advisors in the first 12 months of trading. After that, there shouldnt be the option. That is a personal opinion though.

In this case, whether the commission is taken all up front (indemnity) or on level basis, the charges to the policyholder remain the same. As its the charges that the person pays that matters, the way the advisor decides to take their money doesnt really matter at the end of the day.

Whenever a business case is submitted, advisors are usually presented with a range of remuneration options (in some cases you can have over a dozen options). In each case, there is no impact on the charges to the policyholder.

As we have said before, those on the old business model or a salesforce model may rely on the indemnity commissions to get their fair share. Something that doesnt affect independent IFAs or those on the new model.

cheerfulcat

Can you explain why you think the choice of commission option with the Sterling product has an impact on the plan. Way back I posted the reduction in yields and they are the same for the indemnity and level commission?

I fail to see why an adviser being paid for the advice they give is disgraceful.

Whiteflag, I am baffled by my apparent inability to get my question through to you. What I am asking is, do you really find it acceptable that an advisor is paid five years' worth of commission in advance, repayable by him if the client does not retain the product? Do you not see that there is more than a whiff of conflict of interest? Is it not apparent that, under these circumstances, an advisor is in an invidious position should the investment turn out to be an unsuitable/badly performing one? If he gives the client the correct advice, that is, to sell the investment, he has to pay back the commission. If he says nothing, he keeps the commission and the client loses out.

So, do you still defend this position?

As its the charges that the person pays that matters, the way the advisor decides to take their money doesnt really matter at the end of the day.

I beg to differ - see above

whiteflag_3

cheerfulcat wrote:

Whiteflag, I am baffled by my apparent inability to get my question through to you. What I am asking is, do you really find it acceptable that an advisor is paid five years' worth of commission in advance, repayable by him if the client does not retain the product? Do you not see that there is more than a whiff of conflict of interest? Is it not apparent that, under these circumstances, an advisor is in an invidious position should the investment turn out to be an unsuitable/badly performing one? If he gives the client the correct advice, that is, to sell the investment, he has to pay back the commission. If he says nothing, he keeps the commission and the client loses out.

So, do you still defend this position?



I beg to differ - see above

You have got your question through and I thought I had answered it!
Surely the situation you outline is the same for all products that pay indemnity commission ?

The point I am making is the Sterling product is no different to most others and the original post was completely over the top.

cheerfulcat

You have got your question through and I thought I had answered it!

OK, sorry, I thought you hadn't but then not being an IFA I was not aware that this was a common thing...

Surely the situation you outline is the same for all products that pay indemnity commission ?

Quite, and I find that reprehensible. It means that what is in the client's interest is unlikely to be the main consideration when giving advice.

whiteflag_3

cheerfulcat wrote:

OK, sorry, I thought you hadn't but then not being an IFA I was not aware that this was a common thing...



Quite, and I find that reprehensible. It means that what is in the client's interest is unlikely to be the main consideration when giving advice.

I totally agree the system is seriously flawed, however no one seems to be able to come up with a viable alternative.