Do I have to pay £1000 to the IFA?

Kumamon · 14 June 2018 at 4:07PM

2 years ago an IFA signed me to a life insurance policy. This year I added my partner to the mortgage and together we took out a policy with the same provider - which the mortgage company set up. I didn't clock that this was a new policy.

This week I have been contacted by the IFA chasing over £1000 in lost commission for the next 2 years that the policy was supposed to run. I'm possibly bang-to-rights, though it seems the most incredible scam for what must have been 1 hour's work max over two years ago. I remember him saying it would need to run for a set time, though had not remembered that it was 4 years. It also didn't occur to me that staying with the same provider but adding my partner would cancel my existing policy. I should have been more aware, but life has been insane the last year - and I dropped the ball.

Has anyone had anything similar happen? I'm not sure what to do.

Quentin · 14 June 2018 at 4:30PM

Assuming you agreed to the IFA's ts + cs then expect to be pursued all the way if you refuse to pay

Kumamon · 14 June 2018 at 4:57PM

Hi Quentin - thanks. Yep, I did agree to them.

If it means I have to take the hit and learn a huge lesson, then I will. And I'll never go near an IFA again.

Browntoa · 14 June 2018 at 5:02PM

Or maybe read and understand what you sign next time as well

Kumamon · 14 June 2018 at 5:18PM

I appreciate your forthrightness.

ACG · 14 June 2018 at 6:37PM

There is a lot more than an hours work involved, but yes the commission we receive can be quite a lot when compared to how much work is involved. However the smaller policies mean we do the same amount of work and sometimes barely make minimum wage so it is kind of swings and roundabouts really.

Anyway...Did you sign something to say if you cancel you will pay any claw back?
Have you spoken to the broker about cancelling the new policy and setting up a newer policy? OR what about cancelling the new policy and reinstating the old policy with some amendments?

Personally, I am not a fan of tying customers in to paying the clawback amount, but I can see why brokers do it. Imagine doing all the work and then the customer cancels the policy after 6 months, more or less all of it gets clawed back. In your case it is probably a decent sized policy so even after 2 years the broker will have made maybe £800 which covers their time.

Keep_pedalling · 14 June 2018 at 7:16PM

Kumamon wrote: »

Hi Quentin - thanks. Yep, I did agree to them.

If it means I have to take the hit and learn a huge lesson, then I will. And I'll never go near an IFA again.

IFAs have been free based for over 5 years now, so whoever you dealt with is not an IFA.

Weighty1 · 14 June 2018 at 9:06PM

Keep_pedalling wrote: »

IFAs have been free based for over 5 years now, so whoever you dealt with is not an IFA.

Maybe fee based for investment and pension advice but a large percentage of IFA's still work via commission payments on protection business so they could easily be an IFA.

Kumamon · 15 June 2018 at 10:12AM

Thanks all. Yes, commission payments are still used on insurance - he is an IFA.

ACG, thanks for your answer, it was really helpful. Sorry for my flippancy saying 'it was only an hour's work'. I am annoyed at myself more than anyone else.

He is offering the option to cancel the new policy and reinstate one with him, I am looking into whether that would mean any penalties for me with the company who set that up. I didn't sign anything about 'claw backs' with them, so that should be an option. Though I'm loath to commit myself for another 4 years with the IFA which is what he wants.

dunstonh · 15 June 2018 at 11:28AM

And I'll never go near an IFA again.

That is daft overkill.

Going fee-based with commission offset is a popular method and actually works out better value for money.

e.g. commission is £2500 but fee is £1000. So, the premium is reduced to £1000 is being paid rather than £2500.

He is offering the option to cancel the new policy and reinstate one with him, I am looking into whether that would mean any penalties for me with the company who set that up.

Again that is normal. Things change and the adviser will usually adjust to suit those changes when you put it through them. There is no penalty with the provider. The provider actually claws back their loss from the IFA. That is why the IFA is billing you.

Though I'm loath to commit myself for another 4 years with the IFA which is what he wants.

But if you have a financial need, what is the problem?

Kumamon · 15 June 2018 at 2:58PM

I can see that it is daft, but people can be daft when stressed and depressed. I don't want to be tied to him specifically for 4 years, not because of this commission-fee, but because I don't like him. I've gone back over emails between my partner and I and it's clear that I was confused by what it was - and I didn't like his approach. I felt rushed into it all. Of course I shouldn't have signed anything without understanding it. Of course I could have done better.

I wanted independent financial advice at a really challenging time for us - when two professionals (mortgage adviser, solicitor) badly messed up our mortgage and flat sale. I was trying to sort it and fix everything. I tried to make it better by looking for some free (initially) independent advice.

He contacted me through a query I put on a website. It was all done over the phone - I've never met him. I was panicking as everything was a mess, and I signed his form.

Frankly all I want is that whole miserable time, including working with him, to be behind us. I thought things were finally sorted with our remortgage - and this week it has come back again. I'd pay £1000 to have it all over with, but I'm trying not to make hasty decisions as that it what got me here in the first place.

Do I have to pay £1000 to the IFA?

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