This is hysteria based on ignorance. Perhaps if those fretting would engage directly with the regulations instead of relying on their Networks or hearsay for information they might be a little less worried.

Many providers are now facilitating adviser charging – not only for the initial fee but for the funds under management charge (or trail as it is commonly called).

Of course this assumes two important points:

1. That the provider can accommodate this facility. If not a change of provider may be the answer – provided it is in the interest of the client as well.

2. That you have been upfront and honest with the client in the first place and they know how much you have been taking in ‘trail’. In which case it isn’t rocket science to give them the choice of either paying you directly by invoice or moving to a provider that can accommodate adviser charging. (Of course I well appreciate that those of you in large firms or networks will be under pressure from your sponsors not to be paid directly by the client)

So let us have a lot more calm and a lot less hysteria

Harry Katz   04/12/2013   09:12

I notice many of your events are held in London, including the one on the 8th Jan.
Many advisers are not able to attend in London for many reasons, cost and distance being the main ones I guess. Therefore, do you have any plans to hold events across the UK where many more advisers can have access, o perhaps, to show video's of the presentations etc online after the events?

Neil Evans   04/12/2013   14:07

Hi Neil

A good point, if there was an appetite for them we would look at it. We will ask the question?

Derek Bradley   04/12/2013   14:09

It has to be understood that much of the Pre-RDR trail income is actually contractural and was agreed as such with the client at outset. The trail commission was often taken in lieu of higher initial commission and therefore is covered under the Law of Agency. Therefore I cannot see how the FCA can at a stroke take this away because it would in the opinion of many be a breach of those Agency rules.

This income also added value to our businesses and in so many instances formed a major part of our exit and retirement strategies. To take this away could be so very detrimental to the financial wellbeing of so many well respected and long serving advisers.

It really is incumbent on all of us and that includes the networks to fight against this draconian edict.

Woodstock   04/12/2013   16:01

@Harry Katz.

Harry,
If someone was standing outside your house with a loaded gun, about to steal your lifetime savings and pensions you might be concerned.
If at the same time you were hog tied and unable to fight back you might be angry.
I have been upfront and honest with every client I have ever met in my 25 years as an IFA (now retired). I established a trail commission income and the client serviccing in return for that Trail commission continues to this day via another firm of IFAs. BUT if trail is switched off my pension (income) ends -- As a retired IFA I have no power or legal right to charge a fee instead!

Grosvenor   19/12/2013   14:32

@Grosvenor

I'm probably not much younger than you (maybe even older). I have been an IFA longer than you.

Your tale rather begs the question - why weren't you doing what you advised your clients to do? Have a decent pension and savings? Thereby not having to rely on ongoing trail.

It also highlights another huge scam in Financial Services. Firms to purport to ‘take over’ others (Such as yours) actually do no such thing. They actually steal them. For me buying a firm means paying the money up front – not paying on ‘the never never’. The firm that took over your clients must be laughing all the way to the bank, while blessing the Regulator. They will no doubt be transferring those clients to adviser charging (they don’t have to charge a direct fee) and will now trouser the whole lot. Don’t blame the regulator, blame the firm that filched you clients.

That they are so lacking in decency that they don’t offer to capitalise the income stream and pay you out is yet another matter highlighting the poor practices in this industry.

Harry Katz   20/12/2013   10:27

The sale and purchase of a business is a transaction between two people/organisations involving a willing buyer and a willing seller on terms as conducive to both as can possibly be achieved.

I am 100% happy with the agreement I have achieved with an excellent firm of IFAs who are providing an ongoing service to my former clients.

They are a good honest bunch and have no wish to 'Filch' my clients and I find your presumption that all IFAs are crooks, or somehow bent, rather sad.

Whatever your opinion of this transaction and/or of the parties involved Harry - It is a fact, and was a transaction based upon the statements as to future treatment of trail and renewal commissions by the regulator. Do you seriously and honestly believe that the a complete 'volte face' by regulators is fair and is an example of 'good regulation'

You ask "why weren't you doing what you advised your clients to do? Have a decent pension and savings? Thereby not having to rely on ongoing trail." In fact I have very rarely advised my clients to invest in Pensions for other than tax reasons. After 15 years as a pensions specialist for a leading life office (before becoming an IFA) I became disillusioned by the political interference and over regulation (yes that again!) of the pensions market which in my view was creating an overpriced marketplace representing poor value to investors and savers.

My view has been vindicated and 'Pensions' are now the BAD products constantly villified by the press.

I believed that I would continue working for as long as I was fit and able to do so, and that when I was no longer able to do so I would be able to use the accumulated value in my business, strengthened by a large percentage of repeat income from trail commission, to generate a reduced but ongoing income, potentially for life so long as the clients involved remained happy and continued to receive a high quality service.

I was not wrong. I have achieved that position (albeit earlier than I had planned)

Tell me Harry - How was I to predict the illegal and contract breaching intervention of an out of control Regulator?

There are far greater instances of "Consumer Detriment" taking place daily, perpetrated by Authorised Regulated organisations, than anything which could conceivably arise out of the arrangements I have made for the ongoing service to my former clients. I suggest that the FCA turn their attention to those abuses and that they look closely at the Banks and other large institutional businesses before they, like HMRC, pick on easy targets.

Grosvenor

Grosvenor   21/12/2013   13:03

Unfortunately I have to administer the killer blow.

Way back in the 1980s, when I became MD of a large national IFA practice, I was of course regularly assailed by product providers with their “Terms & Conditions Of Business”, all of which were weighty tomes, and all needed to be signed before commission payments could commence. After thoroughly reading the first few, I noticed something in common with them all.

They all contained the phrase or clause which reserved to themselves the right to change the terms of the agreement, in any way that they may desire, entirely at their own behest, and without reasoning or negotiation with ourselves. They were, and still are to this day, entirely one-sided contracts.

After that, I only read the last few paragraphs of such “contracts” in order to establish this clause was present, and then signed their copy for return, whilst consigning our own copy to the only logical place – the bin. Quite obviously they were reserving the right to do exactly what they wanted, and the right to do so whenever they chose.

When I created my own IFA practice in 1990, and throughout the period to the eventual sale in 2008, these so called “contracts” all contained the same reservation to themselves, and I treated the paperwork with the same due care and diligence – my copies went straight in the bin.

Interestingly, when I sold that business in 2008, which had nearly £300,000 per annum of trail commission attached to it, these contractual clauses were constantly referred to in the sales negotiation by the acquisitive party’s legal representatives. This was one of the tools, amongst many others, which they tried to deploy in order to reduce the purchase price.

Their attempts to reduce the purchase price were largely ineffectual simply because we were highly computer orientated in our client service and our client service proposition, and could prove a virtual 100% sustainability of clients, and the clients desire to retain that service in the full knowledge of what they were paying for that service.

The simple arrival of trail commission in our accounts was not sufficient to justify the valuation of the business. They needed to ensure that they could retain those clients and the client’s desire to pay an ongoing service charge to us, regardless of whether that was called trail commission or something else. Amongst one or two other things, the fact that our trail commission was made abundantly clear to the each individual client, in hard numerical terms, as a natural part of our ongoing services, was fundamental to the very reasonable valuation of the business, and its successful sale.

So, what am I saying?

I am saying that your contract with the product provider, is not worth the paper it is written on - to you.

However, it is an incredibly valuable “contract” to the product providers, as they really do not have an issue with what you might think your rights are, or indeed how you thought your clients justified their payments to you at that time. They will simply rip it up and re-write it to their own advantage.

Hard, but true I am afraid.

Trevor Harrington   01/01/2014   22:54