Unexpected bill from IFA (clawback)

Beckyy

My OH and I recently bought a new house, and took out our mortgage through the IFA we used on our previous house. When we took out our first mortgage through him, we also took out buildings/contents insurance and life insurance policies for both of us. I asked him outright how we paid him, and he stated that he has a flat fee of £150 which covers everything (mortgage/insurance etc.). We paid this both times.

I cancelled the house insurance on first house after 2yrs to a cheaper quote elsewhere. I was intending to cancel our life inurance policies as I felt that we were sold them when we did not need them and the IFA was just making an 'easy sale', but I didn't. (We had paid off our mortgage at that point and it felt like money down the drain as we were financial secure and still very young).

As we were taking out our current/new mortgage he told us he was 'reassessing our life insurance policies and had found cheaper policies' (by a tiny amount). I wasn't keen to continue with our life insurance policies at all, and discussed this with him but he proceeded to attempt to persuade us and took out both of the policies and told us to cancel our old ones. I cancelled the old ones, told him I didn't want the new one so cancelled it and discussed my OH's policy with him regarding the fact that we could get it cheaper elsewhere. I made a thread at the time: https://forums.moneysavingexpert.com/discussion/3919167 He gave me his side of the arguement regarding the benefits of an advised sale etc. but was then on holiday, so we left it saying that I would discuss it with my OH. We decided to cancel his policy, but haven't yet taken out the new one ourselves.

He also said that he would look for house insurance quotes for our new house, and also landlord insurance for our old house which we will be letting out. I agreed it would be good to compare quotes to the ones found ourselves, but he couldn't come close to matching them.

Today we recieved an invoice stating we owed him £770, minus the £300 fees (2 x £150) already paid. Asking for a cheque for £470.

It's broken down to:
-Advice for both our first life insurance policies, and what action to take regarding future policies (he just told us he'd found cheaper policies - he never discussed the old ones)
- Advice/research report/application for the new life insurance policies (I received no 'report' - he didn't even provide a key fact sheet for the new policies)
- Research/preparing report for building insurance for old and new house. (this was a table diagram with a list of prices for each one, I would not class it as a report - I could have done myself in less than 5mins)

Fees: Office meetings £60 Product Research £600, Preparing reports etc. £50 Phone calls and stationary £60.

At no point did we recieve a copy of his terms and conditions, we signed no contract and HE wanted to reasses our life insurance - I did not ask him to and made it clear at the time I wasn't very keen. I also made it clear we would be happy to find our home isnurance but just gave him the chance to try and find a better quote. When I spoke about cancelling our life insurance policies and not wanting to take out the new ones he did not mention anything about clawbacks or potential fees.

I think it's outrageous and have absolutely no intention of paying him a penny more. We just wanted our mortgage, nothing else, and did not sign any contracts stating we did. Does he have a leg to stand on when it comes to charging us for this?

Quentin

No, if no agreement signed, this is a try on!

dunstonh

If you agree a fee with an IFA to do the work but then use the commission to pay that fee you will likely be hit with the bill when the IFA suffers a clawback if you cancel within the clawback period.

There is nothing wrong with that.

In these cases, you would sign a fee agreement and that is there to protect you and the IFA if something like this happens.

There are a small minority of advisers (typically tied agents and estate agent re[ps rather than IFAs but it appears not in this case) where an adviser will try and get you to pay their clawback even if it wasnt a fee based transaction. If you havent signed a fee agreement then tell them to shove it.

Or at this stage, ask them for a copy of the signed fee agreement outlining the fee agreed.

Does he have a leg to stand on when it comes to charging us for this?

If there is a fee agreement then he does. You will likely be taken to court and lose. If there is not a fee agreement then they will huff and puff but havent got a leg to stand on. They may threaten court but without a fee agreement it will get nowhere and they wouldnt even try it.

ACG

Send him a letter asking for a signed contract stating you will pay his commission if you were to cancel the policy.

Also mention that even if he were to provide that then you will be more than happy to go to court or the FOS to explain why you do not believe the fees are valid.

Did you ever see a fee structure telling you how much his fees were? My betting is probably not as i dont know a single mortgage advisor who has one - i dont know any advisor who charges per appointment and for stationary and £60 at that?!?!? was it gold leaf paper? - financial advisor are possibly different though.

Also, on the quote you received from him there should be a page (usually the back page) saying how much commission he would receive - does this match up with either £470? If so then he is obviously trying it on as its a coincidence how it all matches up.

If he didnt provide one - does it say on his paperwork he is an appointed representative of ........ or that he is directly authorised by the FSA?
Just write a letter of complaint to who ever it says to on the IDD (the first document he should have given you in your first meeting) and let them sort it out.

Beckyy

Hi, thank you very much for the replies.

dunstonh, we never signed (or saw) a fee agreement or contract of any sort. I have been looking on his website and it does mention that you can request a copy of the 'About our services' and 'About the cost of our services'. This was never offered us now or 2.5years ago when we took out our first mortgage with him, would the fact that we never asked for it make any difference?

ACG, I haven't a clue where he got the figures from - he used a few sheets of paper and a couple of 2nd class stamps. He didn't give us key fact sheets for the new life insurance policies - just a letter with the insurance provider and monthly cost. He didn't give us any of the so called advice he's trying to charge us for. That's the thing that's bothered me most - we went to him for a mortgage, not for life insurance - yet there is absolutey no mention of this in his invoice. I also don't understand why he's taken the £150 fee off that we paid 2.5years ago, along with the one we paid this time. None of it is making a lot of sense to me. His website states he is the 'principal' of the firm who are FSA registered, but he works alone. He never gave us any initial paperwork this time, or last time that I can remember.

I want to send a letter saying we did not ask him to give us advice on our life insurance policies we just came to him for mortgage advice - he did this on his own accord. That we did not see a fee structure, and only agreed to pay a one off flat fee of £150 for his services. That we did not sign a contract or fee structure stating we would pay any commission if we cancelled a policy which we took out through him. I also want to mention something about not recieving the 'research reports' that he claimed to have given us about the new policies. His 'application' was also terrible - my life insurance had practically every detail wrong. I just don't know how to word it without babbling.

Thanks again for the replies - much appreciated.

ACG

I have that problem when writing letters too.

Write down a list of things you want to cover, then explain each point - read over it a little later - i tend to find i reduce things down later on. Send it recorded delivery.

When getting paperwork off him you should have:
IDD - Initial Disclosure document - this sets out his fees, complaints procedure, what services he offers etc. Mine is 3 pages so its not a huge document.
Quotes for the insurance and usually the back page should have the commission on - as with the moneysupermarket post you made in your other thread.

You might have a few weeks here arguing but i would be very surprised if you end up having to pay this fee. The B&C cover he sold you...did it have legal cover included? That would rub salt into the wounds wouldnt it - using his own insurance policy against him.

Maybe put something together and we can give you some pointers on here?

dunstonh

I want to send a letter saying we did not ask him to give us advice on our life insurance policies we just came to him for mortgage advice

Dont waste your time. If you bought insurance from him then you did take his advice.

It is a very simple issue. A couple of sentences at most. Focus on the issue. Not wishy washy irrelevant stuff like above. The issue is whether you agreed a fee or not. You want to see the fee agreement signed by you. If there is no fee agreement then you will not be paying and if he pursues it then you will take your complaint to the FOS.

Beckyy

EDIT: post below

Beckyy

I have just gone through all our old papers from purchasing our old house and found a 'Client agreement. Investment, Mortgage & General Insurance.'

It has a box ticked that we have choosen for the firm to be remunerated by payment by combination of commission and fee. It's dated 19/10/09 but we have not signed the copy we have.

Part of it says: 'We will inform you of your statutory riht to cancel. The distance marketing directive normally grants you 30 days in which you may cancel a life or pension contract. However there will be occasions where no statutory rights are granted, however this wil be explained before any contract is concluded.'

Also:

'The authority to act on your behalf may be terminated at any time without penaty by either party giving seven days notive in writing to that effect to the other, but without prejudice to the completion of transaction already initiated. any transactions effected before termination and a due proportion of any period charged for services shall be settled to that date.'

There is no other mention of cancelling, commission clawbacks or anything else I can see which is relevant. Does any of that help (or worsen the situation)?

JuicyJesus

Beckyy wrote: »

It has a box ticked that we have choosen for the firm to be remunerated by payment by combination of commission and fee. It's dated 19/10/09 but we have not signed the copy we have.

It is quite usual for customer copies of documentation to not be signed. Usually the firm retains the signed copy as your authority, and you keep an unsigned one for your reference (credit card agreements and loan agreements work on this principle). Chances are the IFA has a signed copy in their records.

I'm not an expert, but I'm not sure that you have a leg to stand on here.

dunstonh

I would ask them for a copy of the agreement. Whilst JJ is right about one copy being signed and the rest not, many of the firms that try this fail to get the client to sign anything. So, ask them for the copy of the agreement signed by you and if they cant produce, then you have nothing to fear.