Trail commission - money for nothing?

dunstonh

I'd absolutely cash it in and re-invest in something I was happier with.

I wouldn't be so hasty.   The circa 2000 Pru WP bonds were pretty good.  They had the capital security at no extra cost (later ones charged for it) and they are pretty good steady eddies (unlike the modern version).

So I say dump those outdated investment vehicles and move on.

It's old fashioned but not everything old is bad.

Elmet

dunstonh said:

I'd absolutely cash it in and re-invest in something I was happier with.

I wouldn't be so hasty.   The circa 2000 Pru WP bonds were pretty good.  They had the capital security at no extra cost (later ones charged for it) and they are pretty good steady eddies (unlike the modern version).

I agree. I took one out in 1998 and started taking regular payments from it in 2003. Total withdrawals now exceed 150% of the original value, and at my last statement the cash in value was still 99% of the original investment. Pretty good, I think, even allowing for inflation.

Linton

br1anst0rm said:

....

So it doesn't seem too unreasonable now to ask for some advice from Evelyn Partners in return for the commission they have taken from my savings over all these years.

But Evelyn Partners claim to know nothing about me.  Their contact centre passed me to their subsidiary department that deals with BestInvest.  They have no record of me as a client either.  But clearly the Pru has been paying out commission on my bond each year to someone....

Hence the title of this post:  in the words of the Dire Straits classic track - is trail commission "Money For Nothing"?  Can I now actually seek, and get, financial advice in return for whatever commission has been paid, and if so, how do I go about it?

AIUI Trail commission is not paying for advice, it is paying for the work carried out in the original purchase and I guess for subsequent work, such as selling the fund  and providing information.  You can, I believe, tell Pru that Evelyn Partners are not your advisors.  But it wont do you any good, Pru will simply keep the money for themselves.

br1anst0rm

dunstonh said:

I'd absolutely cash it in and re-invest in something I was happier with.

I wouldn't be so hasty.   The circa 2000 Pru WP bonds were pretty good.  They had the capital security at no extra cost (later ones charged for it) and they are pretty good steady eddies (unlike the modern version).

So I say dump those outdated investment vehicles and move on.

It's old fashioned but not everything old is bad.

Thanks, @dunstonh .... I'm inclined to agree with you.  The Pru bond seems a decent product, which is why I have kept it.  

And in principle I didn't object to the original intermediary (Towry Law) getting some commission.  After all, even advisers have to make a living somehow.  

But trail commission seems perverse and unjustified, especially if the money goes to a firm I have never heard of and who have done nothing for me.  I am pleased that it has been outlawed now. 

callum9999

br1anst0rm said:

dunstonh said:

I'd absolutely cash it in and re-invest in something I was happier with.

I wouldn't be so hasty.   The circa 2000 Pru WP bonds were pretty good.  They had the capital security at no extra cost (later ones charged for it) and they are pretty good steady eddies (unlike the modern version).

So I say dump those outdated investment vehicles and move on.

It's old fashioned but not everything old is bad.

Thanks, @dunstonh .... I'm inclined to agree with you.  The Pru bond seems a decent product, which is why I have kept it.  

And in principle I didn't object to the original intermediary (Towry Law) getting some commission.  After all, even advisers have to make a living somehow.  

But trail commission seems perverse and unjustified, especially if the money goes to a firm I have never heard of and who have done nothing for me.  I am pleased that it has been outlawed now. 

Just like the "money for nothing" you're currently earning from the bond? Is that also perverse?

dunstonh

But trail commission seems perverse and unjustified, especially if the money goes to a firm I have never heard of and who have done nothing for me.  I am pleased that it has been outlawed now. 

Remember that you are not out of pocket from this. It is the provider. Your terms are the same whether the original advice firm took a large lump upfront with no trail or decided to take it on drip instead.     The provider is effectively the one out of pocket.   However, Pru are a bit cheeky.  They don't pay trail on the full value.   The only pay it on the capital value plus annual bonus accrued to date.  Not the final bonus has accrued to date.   With many plans of that period, the bulk of the growth in value is in the final bonus accrued to date.

phillw

dunstonh said:
Remember that you are not out of pocket from this. It is the provider.

I might be naive, but if it's not coming out of your pocket then why are they telling you about it?

Doesn't the provider only make money from it's customers? How is it not our money?

callum9999

phillw said:

dunstonh said:
Remember that you are not out of pocket from this. It is the provider.

I might be naive, but if it's not coming out of your pocket then why are they telling you about it?

Doesn't the provider only make money from it's customers? How is it not our money?

They aren't telling people about it as far as I can see? All they did was list who they believe to be their financial advisor on some paperwork and the OP has then hunted for information about it. 

Claiming that the profits of a company is "your money" just because you are a customer is a bit ridiculous. Do you also consider Tesco's profits to be yours because you spent money there?

dunstonh

I might be naive, but if it's not coming out of your pocket then why are they telling you about it?

Modern disclosure requirements need to show it.    Modern investment products are built to do that.    However, legacy products were never built or coded to do it and are being shoehorned into it and it leads to quirks.  Especially where a commission is rebated, or it is a trial or renewal commission that doesn't match the charges.

About 15 years ago, I set up a plan for someone where the commission was rebated.   They contacted me last year asking why I was taking a commission from the plan.  I looked into it, and the cost & charges disclosure showed the commission paid to the adviser, but it didn't show the rebates.     The rebates were present in the transaction history, but the disclosure of the cost and charges was incorrect.   I spoke to the provider explaining what was happened.  Their IT dept came back to me a couple of weeks later saying they had no choice and the system couldn't  handle rebates and there was no plan to change that as it only applied to legacy cases which are in continuous decline and its not worth spending money to fix.

On investment bonds, the AMC would be, say, 1% p.a., irrespective of the method used to pay the adviser.    If the adviser had taken commission fully upfront, there would be no adviser commission showing on the cost and charges disclosure now.   If the adviser had taken 0.50% on trail/renewal instead, the plan would still be 1%p.a. but the cost and charges disclosure would now show that 0.50%.      If you told the provider to turn off the commission, the plan would stay at 1.0%, and the provider would keep the commission, and the cost and charges disclosure wouldn't show that.

Doesn't the provider only make money from it's customers? How is it not our money?

Because the company pays the commission, it was not explicitly matched by the fees. Providers paid out of their own money. They then charged the policyholder, but it wasn't on a like-for-like basis.

Their actuaries based the commission and the charges on the policy being held for a defined period on average.  Typically around 7 years.   

In some cases, you make that work in your favour.  e.g. Aviva had an investment bond where if the adviser rebated the initial and took 0.5% trail, it would have a negative reduction in yield due to charges after 5 years.