Views on Massow's offer to reclaim trail commission?

King_Of_Bling

What do you think about Massow's http://www.paymemy.com/mission/ offer to return 80% unearned trail commission? Looks good to me if you are not offered on-going advice. Good until FSA changes laws from 01-01-13. Might get some dosh back in time for xmas:j

Aegis

It's one of many such options at the moment. Probably the most open is Cavendish Online, who charge a one-off fee and then rebate all trail commission they receive. For pots in excess of about £50,000 Cavendish will be a clear winner over a service that rebates 80% commission without a fee if you have to repension. For other investments or for new contributions, that amount can be considerably lower before they become the best option.

I've been considering something like this for a while with my investments, but haven't quite gotten around to doing the paperwork!

dunstonh

Largely pointless as we are just over 12 months away from having trail switched off. Plus the vast majority of people are not in pensions that pay any trail commission. You would have to be in a SIPP or platform pension or a more modern pension agreement for that to be the case.

Pension commisison cannot be rebated to you as cash (unauthorised payment under HMRC rules and would be subject to 55% penalty tax). So, they would need to transfer the pension to a scheme that allows nominated trail or have explicit charging.

A cheaper option may be to employ an IFA on transactional basis, pay a one off fee and get nil trail from the start.

My feeling is that they are a few years too late to do this.

Investor99

Hi all,

In response to the above comment it has been confirmed today by the FSA that Ivan Massow's new website will in fact be able to operate both pre and post-RDR in it's function of rebating trail commission. So reports that it will only be able to operate before RDR seem to be way off the mark.

Also I think it's worth noting that RDR will only affect new policies when it comes into force. As a result any trail commission on pre-RDR policies will still exist and can still be claimed on, which I fully intend to do.

dunstonh

In response to the above comment it has been confirmed today by the FSA that Ivan Massow's new website will in fact be able to operate both pre and post-RDR in it's function of rebating trail commission. So reports that it will only be able to operate before RDR seem to be way off the mark.

Seeing as the FSA themselves havent decided on legacy commissions fully yet, it's very strange they were willing to confirm that to you. A day doesnt seem to go by without the issue of legacy commissions being covered in the financial press. Yet you have had a straight answer from the FSA. Perhaps you would like to tell Money marketing or Citywire as they will be interested.

Also, you completely missed the point of my post. I was not saying they they couldnt function post RDR. Just that it is largely pointless at this stage as why would someone want to get 80% rebated when all they have to do is change the pension or investments and effectively get 100% rebated (as it wont be charged)

Here is one area that the FSA have given info on (copied and pasted and in relation to trail commission paying contracts and not insured based contracts which most pensions are):

The FSA said: ‘When a new client is taken on by a firm after 2012, he will necessarily be entering into an adviser charging agreement, which should provide a complete description of the services he will receive, and how he is expected to pay. So there is a question of how this can be reconciled with the start of payment of what is, from the adviser firm’s point of view, a new stream of trail commission.'

The main justification for allowing an old adviser to continue taking trail when a client has moved adviser is that ‘the new adviser has taken on the responsibility for the customer’s future financial arrangements’, the FSA added.

The regulator has decided to allow re-registration to continue, where permitted by the provider and the previous adviser, and subject to the terms of that contract.

However, if a new adviser chooses to re-register commission after 2012, a new requirement will apply.
1.Customers must be told when an adviser applied for re-registration
2.Firms will be required to tell customers the amount of commission being transferred
3.There is a new requirement that the adviser must provide the customer with an ongoing service in return for the trail commission

---

So,looking at point 3 in particular, there will be no ongoing service offered by this firm. So taking IFA trail commission for doing nothing will not be allowed on transfers post RDR.

Also I think it's worth noting that RDR will only affect new policies when it comes into force. As a result any trail commission on pre-RDR policies will still exist and can still be claimed on, which I fully intend to do.

No it does not. Legacy commissions are still under review. Trail will continue on pre-RDR contracts until there is a change on the investment.

You seem to have ignored the other points that rebating pension commission as cash would be classed as an unauthorised payment under HMRC rules. And that most pensions do not have trail commission.

Investor99

Just as a quick reply the information wasn't confirmed to me at all but was confirmed to the FT Adviser yesterday evening in an article titled 'FSA Confirms trail recouping website is within rules'. I only found this having done some online research about the new company as I was intrigued to find out more.

In terms of rebates on pensions constituting as unauthorised payment then again from research it appears that Mr. Massow has had confirmation from HM Revenue & Customs that payments back to his clients will not constitute as an unauthorised payment. This was reported in an article by Money Marketing titled 'Massow firm not targeting IFA's'.

Meeper

What nonsense.

dunstonh

There is an article but it avoids the issues and answers a question that no-one was asking. No-one is interested in whether it is possible or not. It is obviously possible as IFAs have been doing it for ages. However, its a case that it is late tot he game given that clients can get 100% rebated effectively (by not having it taken in the first place). So, why pay someone 20% of it? Plus, with RDR stopping trail in 16 months time, all new business after that wont have trail. So, all a consumer has to do is alter their contract or transfer it to have it no trail.

Speaking to FTAdviser, Mr Massow said he believes that, generally, if a client is not receiving a service from an IFA, then the IFA should not receive trail commission.

So, why is he taking 20% of it then when he is doing nothing?

If its wrong to pay trail for doing nothing, then it doesnt matter if its 100% of an amount or 20% of an amount.

In terms of rebates on pensions constituting as unauthorised payment then again from research it appears that Mr. Massow has had confirmation from HM Revenue & Customs that payments back to his clients will not constitute as an unauthorised payment. This was reported in an article by Money Marketing titled 'Massow firm not targeting IFA's'.

I would love to see HMRC say that. For 20 odd years, they have put a block on it. You cant just take money from a pension and pay it out like that. Otherwise, you could create artificially high charges, then rebate them as cash.

besti

If you search the HMRC website for RPSM09106040 it would appear that this is allowed and would not be counted as an unauthorised withdrawal.

dunstonh

Interesting reading and I was aware of last years clarification (or change) although hadnt really given it any interest until now. I just spoke to my compliance department (and was told I was not the only one in the last few days to query it) and they said that they still consider CASH rebates would be classed as an unauthorised payment. Rebates into the plan perfectly fine but given that HMRC give a narrow definition of a case where it may be acceptable and it states that it is related to advice given, then they cant see how a non-advice service can rebate as CASH rebates.

Effectively, the area is too grey to take chances with. If the consumer got hit with a 55% tax charge they would not doubt complain and its not worth the risk was what I was getting.

I still think that on pensions this is largely pointless. Most insurance company pensions pay no trail and even legacy contracts pay little or nothing in renewals. I have a bunch of 12p and 8p turning up every month and if someone wants to agency transfer those away then they would be doing me a favour as the admin involved in processing them makes them more of a pain in the neck.

Wasnt there a firm some years ago, i think it was called moneyspider or something like that, which tried this and got similar media coverage? That didnt work either.

I can see merit in the concept and with the right marketing and sufficient volume and if we were not so close to RDR, it may work. I suspect though that consumer expectation on they think an IFA gets paid in renewals/trail and what the IFA actually receives are two different things. We also must not forget that tied agent contracts are nearly always indemnity arranged as well.