Financial Advisor Problem

John_D.

I paid a financial adviser a fixed fee to select and arrange a wrap account for my investments. He did this and arranged an account with Transact.

A few years on and he's unhappy that I'm not generating any commission for him. He therefore withdrew his firm as financial adviser for my Transact account. This means that the fees I have to pay Transact have skyrocketed. (Transact has separate tariffs for those with and without financial advisers.)

He's now threatening to do the same for my pension funds, also held with Transact and arranged on a fixed fee basis, unless I generate 1% commission for him every year.

This certainly doesn't seem fair. Is it legal? Do I have any redress?

Any thoughts much appreciated.

Aegis

It's probably legal, but it certainly doesn't sound like treating customers fairly. How long ago did he set up the account for you and was it clear at the time that you didn't want ongoing servicing? Did he make it clear that the quoted platform fees were only available as long as you paid him a (pretty high) annual fee/commission?

Also, how much do you have on the platform? I don't use Transact for my own clients, but I understand that they're seen as something of a premium platform, i.e. better value for larger portfolios.

If the adviser put you onto this platform with a small portfolio (i.e. paying over the odds for functionality you didn't need) and knew that you didn't want ongoing servicing, then this might feasibly be perceived as a mis-sale, but without knowing the specific circumstances it's hard to say.

That said, surely your loss at this stage is only the higher costs while you find yourself an alternative to transfer to, so is it not worth just transferring to another platform rather than looking for redress?

dunstonh

A few years on and he's unhappy that I'm not generating any commission for him.

Any or enough? If you had assets on transact then the fee would have generated something (note, transact is a fee platform, not commission).

With the introduction of RDR, a lot of firms have had to cull the ongoing servicing of smaller value business which does not generate enough of a fee to cover the ongoing servicing requirements.

This certainly doesn't seem fair. Is it legal? Do I have any redress?

it is legal. Just as you can withdraw from being serviced by the adviser with notice. The advice can withdraw offering services to you with notice.

That said, the more common approach (based on conversations I have had with other advisers and what I do myself) is to move the person on to transactional basis and adjust the product/platform/funds to reflect that or let them go elsewhere. That is typically done with a one off fee.

Do I have any redress?

The changes are in part caused by the regulator introducing the retail distribution review. Cross subsidy that used to exist has been reduced and larger investors now typically pay less than they used to (they used to cross subsidise the smaller ones). So, the smaller ones either need to pay more or be moved off servicing.

The regulator has since told platforms that they have to have a proposition to cater for clients without an adviser. So, that is why Transact have the extra fee.

You dont have any redress here. However, you do have plenty of choice. If you want servicing and think your portfolio is big enough to get it cost effectively then find a different adviser. If you dont want servicing then move the investments to a DIY platform.

John_D.

Thanks for the feedback so far. To answer questions:

The Transact account was set up 7-8 years ago.

It was absolutely clear at the time there was no need for ongoing servicing. (I'd worked in investment banking for 20 or so years at the time so didn't need any ongoing advice.)

Since the account was set up the adviser has not received any money from Transact or myself. (But then, I understood the fixed fee I originally paid covered the advice paid and ongoing provision of the Transact account. After all, there was absolutely nothing more for him to do. His removal of himself as adviser was, I suspect, an act of spite.)

The investment amount was a few hundred thousand pounds.

Transferring to another platform for me is a significant issue since I'm currently retired overseas in Asia. If I also have to transfer my QROPS investments (as the IFA is threatening to remove himself from that account too) is an even bigger headache. I only recently transferred from Cofunds to Transact because of problems I had with Cofunds. I suspect it's going to be impossible to transfer my QROPS investments to a DIY platform.

IronWolf

1% is a very high fee. If you can't move the account, you could try to negotiate him down to something like 0.5%, and then give him jobs to do so he isn't getting it for nothing.

Aegis

John_D. wrote: »

Thanks for the feedback so far. To answer questions:

The Transact account was set up 7-8 years ago.

It was absolutely clear at the time there was no need for ongoing servicing. (I'd worked in investment banking for 20 or so years at the time so didn't need any ongoing advice.)

Since the account was set up the adviser has not received any money from Transact or myself. (But then, I understood the fixed fee I originally paid covered the advice paid and ongoing provision of the Transact account. After all, there was absolutely nothing more for him to do. His removal of himself as adviser was, I suspect, an act of spite.)

The investment amount was a few hundred thousand pounds.

It's likely the adviser has quite a bit of ongoing administration even if only in the form of periodic statements to file and a client account to maintain. Not enough to warrant a 1% annual charge, but he may be thinking to himself that if you aren't a client any more he has capacity to deal with someone else, and I suppose that's his right.

You've managed to achieve 7-8 years of usage for a single flat fee, which really isn't bad at all (unless the initial fee was a rip off, of course!), and withdrawing his service is something he's entitled to do. If he agreed to permanently act as servicing adviser from outset without any end, then he was being far too generous!

Transferring to another platform for me is a significant issue since I'm currently retired overseas in Asia. If I also have to transfer my QROPS investments (as the IFA is threatening to remove himself from that account too) is an even bigger headache. I only recently transferred from Cofunds to Transact because of problems I had with Cofunds. I suspect it's going to be impossible to transfer my QROPS investments to a DIY platform.

If he's having to maintain the paperwork associated with a QROPS too, I'm not surprised he wants some sort of annual fee. Those are headaches! That said, within a QROPS structure there's no real reason why you couldn't set up a DIY platform linked back to the overseas trustee. There are bound to be a few platforms that would accept that arrangement (I've not tried, incidentally, so this is not based on experience but common sense).

IronWolf wrote: »

1% is a very high fee. If you can't move the account, you could try to negotiate him down to something like 0.5%, and then give him jobs to do so he isn't getting it for nothing.

1% would be unjustifiable for an adviser offering no advice and placing no trades. I'd personally think about offering 0.1% or so, as that should be a few hundred pounds a year, surely adequate to cover an admin-only client.

John_D.

Aegis wrote: »

It's likely the adviser has quite a bit of ongoing administration even if only in the form of periodic statements to file and a client account to maintain.

To be honest, I hadn't realised there would be any ongoing administration for the IFA. After all, the advice has been already given and the IFA's job done. I presume that all this administration is purely internal to the IFA's organisation. Am I right about this?

Aegis wrote: »

You've managed to achieve 7-8 years of usage for a single flat fee, which really isn't bad at all (unless the initial fee was a rip off, of course!), and withdrawing his service is something he's entitled to do.

I still remain a bit confused given that I was led to understand that paying a fixed fee and paying by commission for a service were simple alternatives. I understood it to be a simple choice between paying a lump sum up front or paying over the longer term.

Aegis wrote: »

If he's having to maintain the paperwork associated with a QROPS too, I'm not surprised he wants some sort of annual fee. Those are headaches!

Again, is that purely internal paperwork? I understood that reporting to HMRC (and in my case, to the Guernsey authorities) was the responsibility of the QROPS provider.

And if the paperwork isn't internal, what would happen if my IFA does withdraw as adviser to my QROPS? There's be nobody to do that work.

Aegis wrote: »

That said, within a QROPS structure there's no real reason why you couldn't set up a DIY platform linked back to the overseas trustee.

I think that might be a lot more difficult than you're suggesting. One of my key requirements is to be able to make transactions myself. Another is the ability to hold both funds and shares. I was recently forced to move from Cofunds to Transact because Cofunds decided they were no longer happy with my directly submitting investment instructions.

Even looking for a simple DIY wrap account as an alternative for my ordinary investments, for the platforms I've approached I'm either getting a straightforward "no - you have to be UK resident", to "perhaps".

Aegis wrote: »

I'd personally think about offering 0.1% or so, as that should be a few hundred pounds a year, surely adequate to cover an admin-only client.

Paying 0.1%/year would certainly be better than the hike in charges that Transact is imposing. How (from abroad) would I go about finding an appropriate IFA?

I also rather suspect that I'd be required to return to the UK to sort things out. Right?

Anyway, thanks for the feedback so far. It's given me a better handle on my unexpected (and rather stressful) situation.

dunstonh

I still remain a bit confused given that I was led to understand that paying a fixed fee and paying by commission for a service were simple alternatives. I understood it to be a simple choice between paying a lump sum up front or paying over the longer term.

Transact has never paid any commission. It rebates commission to you within the investment. It is a fee based platform only.

Again, is that purely internal paperwork? I understood that reporting to HMRC (and in my case, to the Guernsey authorities) was the responsibility of the QROPS provider.

And if the paperwork isn't internal, what would happen if my IFA does withdraw as adviser to my QROPS? There's be nobody to do that work.

You either DIY or employ someone else.

Paying 0.1%/year would certainly be better than the hike in charges that Transact is imposing. How (from abroad) would I go about finding an appropriate IFA?

I also rather suspect that I'd be required to return to the UK to sort things out. Right?

Your choice would be limited but you would need one that deals with expats. There are a few larger companies that act in that area. Most smaller ones do not.