IFA service and fee mystery

Bertie-H

Hello,

Some time ago I contacted an IFA (also a member of a reputable institute) for some advice on my retirement arrangements.

The initial consultation was offered free of charge. In addition, I presented him a voucher which I was given by one of the companies for a free consultation. He told me - if it comes to it - he would either charge on commission or fee basis. But at this stage we made no further decision to this effect.

Although I had some rough figures, he wanted to get more accurate details about my pension investments and for this purpose he asked me to sign a form of authority to give him access to information regarding my personal pensions.

He now appears as my 'named adviser' and I believe - at least with one company - he his now entitled to some sort of commission if I make any changes to the plan, plough extra money into it or convert it into an annuity.

I did write to him to explain to me where we stand. In his reply he confirmed the fact that I gave him authority to access my information. But he also stated - and this really puzzles me - that he is now my servicing adviser. During the consultation I had with him he never informed me about this little detail.

I have the feeling that his behaviour was not quite proper, especially since without formal agreement he now appears to be entitled to commission payments and possibly even other payments from at least one of the insurance companies.

I would really appreciate your views on this.


Best wishes


Bertie

dunstonh

Although I had some rough figures, he wanted to get more accurate details about my pension investments

Thats good. Its a sign of a good IFA that they do not rely on rough information but obtain full details. A lot of things will be asked for which you would not be able to supply. (GARs , GMP, charging structures, fund options, projections, pension review case etc)

I have the feeling that his behaviour was not quite proper, especially since without formal agreement he now appears to be entitled to commission payments and possibly even other payments from at least one of the insurance companies.

He has done nothing wrong and what he has done is the norm when requesting information. Most insurance companies cannot appoint more than one servicing adviser/agent. So, when you request information, the insurance companies change the agency to this adviser.

Whilst that technically means that they would be entitled to any ongoing commission, it needs to be noted that most pensions dont have any ongoing commission.

You are asking the IFA to act on your behalf and give you advice and that is why the insurance companies have changed the servicing agent to them.

MikeJones_2

Hi Bertie,

Bertie-H wrote: »

Although I had some rough figures, he wanted to get more accurate details about my pension investments and for this purpose he asked me to sign a form of authority to give him access to information regarding my personal pensions.

This is a standard course of action by a good IFA to help you with your retirement planning. The adviser needs to know what provision you have already built up.

Bertie-H wrote: »

- he his now entitled to some sort of commission if I make any changes to the plan, plough extra money into it or convert it into an annuity.

If you feel that the situation between you and the IFA is now untenable, a simple solution would be to change to another IFA, as and when you make any changes.

However, might it also be possible for you to try to (re)build the relationship with the existing adviser by explaining to him exactly how you feel?

Bertie-H wrote: »

During the consultation I had with him he never informed me about this little detail.

That is clearly an error on the part of the IFA and one that the IFA might not have realised would cause you so much 'discomfort'.

Bertie-H wrote: »

I have the feeling that his behaviour was not quite proper, especially since without formal agreement he now appears to be entitled to commission payments and possibly even other payments from at least one of the insurance companies.

If to get your pension information, the pension provider insists on an 'agency change' to the IFA requesting that data, then the IFA has not acted improperly.

If the IFA has failed to communicate this process and effect to you then that is a mistake (and we're all prone to making them - it's how we react to them that is important).

IFAs are tightly regulated and the FSA has made Treating Customers Fairly a set of core principles which IFAs must embrace.

I'd suggest that it would do you no harm to pick up the 'phone and explain your discomfort. If the IFA is unaware of how strongly you feel about this, then he is unable to react accordingly.

Hope that helps.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

EdInvestor

You can also inform the various providers that the IFA no longer represents you whereupon any trail commission that may be available will be pocketed by the insurance company instead.

There used to be a company which would rebate most of this trail commission to you if you signed up with them, taking only a small annual fee. Can't remember the name.

dunstonh

In my years of doing this I have only ever had one person unhappy about the agency switch. It turned out he was unhappy as he was using 3 IFAs at the same time and the insurance companies would only send out the information to the one that had the agency. As three requests went in during a short period, one IFA got the information three times and the others didnt. The insurance company refused to pass on the details to the other two IFAs saying that only one can be a servicing agent.

It also needs to be noted that many insurance companies may change the servicing agency but leave the commission agency the same as the original agent (legal and general being an example). Most legacy companies that had tied agents dont have servicing agencies and just provide the info. The most common method for insurance companies operating in the IFA field though is to have one agent at any one time.

If you are not the servicing agent you cant get valuations and the like and access policy details via the providers extranets and back office software feeds. If someone was to ever refuse me access to being the servicing agent I would refuse to be their adviser. It suggests something to hide and a client you dont want to deal with as they are making it more difficult to do your job.

There used to be a company which would rebate most of this trail commission to you if you signed up with them, taking only a small annual fee. Can't remember the name.

And most people found they ended up paying more than they got back as contrary to popular belief, most contracts have no trail and even when they do its usually tiny. Amounts of 96p a year or that sort of range.