Commission to IFA

thenewwoo

I have recently taken back the management of my pension from an IFA. Upon reading the statement it confirms that my monthly deposits have been used to repay the commission that the pension provider paid to the IFA. I have been though all my documents and although I was told commission would be paid I did not know that I would be paying it. Of course I have no problem with paying for advice, some people pay for mine, but I feel that I have been conned. I was wondering how common this arrangement is and if anyone else has come across the situation?

dunstonh

I have been though all my documents and although I was told commission would be paid I did not know that I would be paying it

Who did you think would pay it?

Of course I have no problem with paying for advice, some people pay for mine, but I feel that I have been conned.

You havent been. The commission would have been disclosed on the personal illustration provided to you by the advice and on a copy supplied with the cancellation rights.

I was wondering how common this arrangement is and if anyone else has come across the situation?

Commission ceased to exist in January 2013 with explicit charging taking its place. However, explicit charging has been very common for about 7-8 years now with most implicit commission contracts proving to be poorer value than explicitly charged ones (e.g. with implicit commission, long after the IFA had been paid, the product provider would continue to rake in the higher charges for the life of the contract. Whereas with explicit ones, the charge would cease after the IFA was paid - no more, no less).

thenewwoo

I thought that the pension company would pay it to the IFA. The pension company would manage pensions and make a money for me and them. I was aware that the advisor would be paid a commission and the amount. So what you are saying is that I should have read the documents more closely because it should have been obvious that this was the arrangement?.

doughnutmachine

thenewwoo wrote: »

I have recently taken back the management of my pension from an IFA. Upon reading the statement it confirms that my monthly deposits have been used to repay the commission that the pension provider paid to the IFA. I have been though all my documents and although I was told commission would be paid I did not know that I would be paying it. Of course I have no problem with paying for advice, some people pay for mine, but I feel that I have been conned. I was wondering how common this arrangement is and if anyone else has come across the situation?

as a matter of interest how much did the IFA take in commission? at least moving forward you should have no further fees to pay

thenewwoo

It was circa £5,000 and you're right there would be no more fees. My issue is that I wasn't told how the commission worked. But I accept I may have been naive not to have read the small print, so to speak. If I knew the arrangement I might not have acted differently but I may have.

doughnutmachine

thenewwoo wrote: »

It was circa £5,000 and you're right there would be no more fees. My issue is that I wasn't told how the commission worked. But I accept I may have been naive not to have read the small print, so to speak. If I knew the arrangement I might not have acted differently but I may have.

!!!!!!! that is a lot of money!

since it is a lot of money it could be worthwhile reading the fine print of the contract. there might be some way to get some money back.... but it's probably unlikely.

dunstonh

I thought that the pension company would pay it to the IFA

And the pension company take it from your pension.

So what you are saying is that I should have read the documents more closely because it should have been obvious that this was the arrangement?.

Back then, yes.

It was circa £5,000 and you're right there would be no more fees. My issue is that I wasn't told how the commission worked. But I accept I may have been naive not to have read the small print, so to speak. If I knew the arrangement I might not have acted differently but I may have.

£5k is a lot. However, under the commission system it was largely percentage based with large cases cross subsidising the smaller ones. Nowadays, you would not expect to see a fee that size unless specialist involved.

since it is a lot of money it could be worthwhile reading the fine print of the contract. there might be some way to get some money back.... but it's probably unlikely.

Its commission. It was disclosed. The only way to get a refund is it was fee based with commission offset and the commission exceeded the fee.

bigfreddiel

thenewwoo wrote: »

My issue is that I wasn't told how the commission worked

fairly typical of not only ifas,but most financial 'professionals'

transparency and actually stating their actual charges is not high on their agenda

hats one reason for rdr, but 8 months in its not really working

in fact 40% of people who have used an ifa have ditched them - the reason being this lack of clear information on charged and what they actually do - fo example an annual review that confirmsno changes need to be made - to be quite honest you can do this yourself now with the wealth of info on the web, and who cares more about your investments than you?

now, if you could negotiate a fee on performance you may be getting somewhere, say 3% of actual gains (not on the entire pot) and he pays you a very generous 1% of actual losses - that should work nicely

cheers

fj

jem16

bigfreddiel wrote: »

fairly typical of not only ifas,but most financial 'professionals'

transparency and actually stating their actual charges is not high on their agenda

I would suggest that it's fairly typical of most people to not actually read the illustrations which clearly lay out all commissions and now charges. Certainly all the paperwork I received 7 years ago had everything clearly laid out with the charges for the funds themselves and for the charges for the IFA.

in fact 40% of people who have used an ifa have ditched them

Can you provide the source of this information please?

the reason being this lack of clear information on charged and what they actually do - fo example an annual review that confirmsno changes need to be made - to be quite honest you can do this yourself now with the wealth of info on the web, and who cares more about your investments than you?

I asked you this on another thread but you failed to answer. Perhaps you could this time - what experience have you actually had of using an IFA and for how long?

now, if you could negotiate a fee on performance you may be getting somewhere, say 3% of actual gains (not on the entire pot) and he pays you a very generous 1% of actual losses - that should work nicely

I doubt it very much. All that would happen is the IFA would be encouraged to take unnecessary risks for the client to try to ensure a steady income stream. It would also work out very costly for the client in the long run with more years showing a positive return than negative.

dunstonh

fairly typical of not only ifas,but most financial 'professionals'

And how have experience of enough of the 30,000 out there to have that opinion considering you have never used an IFA?

transparency and actually stating their actual charges is not high on their agenda

Since 1994, the remuneration has been stated on the illustrations. Since January this year a fee agreement is required.

in fact 40% of people who have used an ifa have ditched them - the reason being this lack of clear information on charged and what they actually do - fo example an annual review that confirmsno changes need to be made - to be quite honest you can do this yourself now with the wealth of info on the web, and who cares more about your investments than you?

Made up stat.

thenewwoo

I think I should be a little clearer about my complaint. I was ware that commission would be paid to my IFA, but not the way it was paid.
If I was told then I could have made an informed choice. I wasn't, so I couldn't.