IFA Money For Nothing

GandalfTheTight

I have a Standard Life Pension set up 10 years ago by an IFA.
Since it was set up I haven’t heard from the IFA.
Every time I put lump sums of money into the pension this IFA gets cash.
Last week I put in £16,000 and he got £420.
Is there anything I can do to get the £420 left in the account?
I wouldn’t mind him getting the commission if he was actually doing anything!

Voyager2002

Just remember that he did do a lot to set up the pension. Not to mention the years of study ane experience that enabled him to choose this pension plan for you.

SallyG

Bit of background:
http://www.parliament.uk/documents/commons-committees/treasury/RDRWrittenevvolumetwo.pdf

"8
Charges consist of a mixture of up front and on-going charges. The formula for remuneration is selected by the IFA from a menu of commission options offered by the pension provider. We have heard from a number of people that the IFA makes this choice according to his or her desire for up-front cash or long term cash-flow. Many IFAs are leaving the industry in the near future and they will often want to develop an on-going stream of income, which adds value to their business before it is sold.
9
The initial commission might be 30% to 50% of the first year’s premium for a regular pension plan, or 4% to 6% of a one-off transfer. Trail commission is typically 0.5% of the fund value. (Some pension providers pay IFAs renewal commission based on regular payments into the pension instead of trail commission.)
10
Trail commission is paid on the fund value until the policy is either transferred to another provider or used to purchase an annuity/drawn down. The purpose of trail commission is far from clear. Many IFAs see it as compensation for the on-going servicing of their clients. This sentiment is echoed on the trade association’s own website3. It says: “there may be annual commission payments to cover ongoing advice from your adviser over the lifetime of your products.” Others see it solely as deferred initial commission. A number of pension providers require IFAs to continue to act on behalf of their client to receive trail commission and will cease to pay trail commission if they believe the IFA is no longer servicing the client.
11
The use of trail commission has grown over recent years and the on-going nature of the commission on all business written before RDR means that the effect will persist. Consumer Focus agrees with the FSA that on-going payment of trail commission without service should cease. We further argue it should cease on existing policies if the IFA has lost touch with their client."

So you tell your pension provider you don't want to carry on paying the IFA but it's still deducted from your fund except now they pay it to themselves instead - or does the provider not deduct any commission because they're not "advising" you ?
Will the pension company carry on deducting commission from my pension fund whatever happens in 2012 -even if I bought it direct from them?
If I use the direct sale route to transfer my fund to a new provider after the 2012 RDR rule change will the provider be allowed to charge commission?

Banksie

I set up cash and share ISAs in 2009 directly from the fund supermarket on the This Is Money web site with no IFA advice or contact yet, I paid commission at set up to Skipton Finacial Services and I am paying commission to them everytime I top up these accounts. I've never spoken to a Skipton IFA and never received personal advice. Why am I paying these charges and, more importantly, can I set up ISAs for 2011 myself, on-line, without paying commission to an IFA? Like GandalfThe Tight says, it's a lot of my money and "I wouldn’t mind him getting the commission if he was actually doing anything!"

SallyG

Gandalf wrote "Last week I put in £16,000 and he got £420."
At least you can see what happened G - my stakeholder commission charges are apparently paid to the provider because I bought direct to save on IFA commission charges -they're excised undetectably - no separate tally.
Did the IFA get you a stunning deal on the annual charges ?
Are you paying him 0.5% trail commission as well?
Will you try to get it stopped by Standard Life - I'd love to know their response.....

GandalfTheTight

Apparently nothing I can do. I can change it to someone else or take it off – but it I take it off Standard Life gets it!

The IFA didn’t get particularly good rates – the money is in two tracker funds (FTSE and international) with 1% charges. They got over £1000 to set it up.

Someone should set up a Charity IFA where people can set these policies to!

GandalfTheTight

SallyG wrote: »

Will you try to get it stopped by Standard Life - I'd love to know their response.....

Not sure it helps anyone getting it stopped.

When I contacted the IFA his response was:

I can confirm that we currently work on an ad-hoc basis with yourself (as and when required) as we have no ongoing letter of engagement in place.

And sent me through details on how they can review the pensions etc for a fee of £9,000 (3% + VAT). In other words – what they did 10 years ago again!

I also sent him an email asking what I paid him £420 for?

SallyG

and how about share ISAs ?
http://www.telegraph.co.uk/finance/personalfinance/investing/isas/8380306/Isa-fees-outweigh-tax-breaks.html

dunstonh

I have a Standard Life Pension set up 10 years ago by an IFA.
Since it was set up I haven’t heard from the IFA.
Every time I put lump sums of money into the pension this IFA gets cash.
Last week I put in £16,000 and he got £420.
Is there anything I can do to get the £420 left in the account?
I wouldn’t mind him getting the commission if he was actually doing anything!

If you are bypassing the IFA then the IFA probably thinks you dont want to use them. Its all about communication and you and your IFA dont seem to be any good on that front.

You are not paying the £420 so you will never get it.

1% AMC was spot on for 2001.

If you dont have a servicing contract with the adviser then you wont get servicing. If you only work on transactional basis then you will only get transactional advice. If you want servicing then go with that option.

Someone should set up a Charity IFA where people can set these policies to!

Too much liability and cost. Plus there is little point on fee basis.

GandalfTheTight

dunstonh wrote: »

Its all about communication and you and your IFA dont seem to be any good on that front.

I just got an email from them. Apparently they ‘no longer’ recommend funds. They stopped about 2 years ago because their recommendations were not doing as well as trackers! At least they were honest

He told I could remove their name as IFA but I don’t see any point if the money just goes to Standard life

Too much liability and cost. Plus there is little point on fee basis.

Is that true?
I assume you can be an IFA and not give any advice (as mine has been) in which case moving commission to a charity (or even some of it) for new purchases would be worth it – wouldn’t it?

dunstonh

I just got an email from them. Apparently they ‘no longer’ recommend funds. They stopped about 2 years ago because their recommendations were not doing as well as trackers! At least they were honest

So, why didnt they recommend tracker funds then? An IFA is required to make recommendations. A tied agent/multi-tie puts it in your hands to decide. Is it possible that they have ceased to be an IFA and gone multi-tied or similar?

Is that true?

I wouldnt have said it if it wasnt. The cost of advice doesnt just hit you this year. It hits you next year as well. Liability and potential liability along with regulation compliance are some of the biggest issues in retail distribution and advice at the moment. Personally, those costs alone run at around 1/3rd of my turnover

I assume you can be an IFA and not give any advice (as mine has been) in which case moving commission to a charity (or even some of it) for new purchases would be worth it – wouldn’t it?

Surely it would be better to work on fee basis and get the product set up commission free?