Trail commission gives advisers an incentive not to switch funds
Many years ago a good friend, who at the time worked as a financial adviser, gave me a piece of advice: “Always pay fees for advice, never opt for commission – fees are ultimately a fraction of the cost of commission.”
Needless to say, he is no longer a financial adviser. But he was correct.
Last year we saw a tremendous flurry of activity before commission payments on pension plans to corporate advisers was scrapped on 31 December. Many employers were convinced to switch pension providers so their adviser could have a last gasp grab at a hefty commission.
This dreadful practice often found employers, and certainly their staff, unaware of the true costs of their scheme to the extent to which some even believed they were getting their scheme for free. It is especially damaging because commissions are taken out of contributions, greatly eroding employees’ long-term investments.
Any pension schemes put in place under the old commission system now have an added burden to bear (and fear).
Contracts signed before 31 December 2012 have until May this year to implement them. Advisers who put them in could well be loath to recommend any changes that will stop ongoing (trail) commissions being paid out. Many in the industry are, consequently, concerned that these schemes and their investment funds choices will grow old and dated (see also Governance vacuum for contract-based pension schemes).
A good place to start is by having a good pensions governance committee at your organisation so the full burden does not just land on HR.
Be aware, and be wary – this is a potential misselling scandal, especially if employers auto-enrol staff into a scheme that is not (on an ongoing basis) the best it could be.
Debi O’Donovan
Twitter: @DebiODonovan
please remember there is a rather distinct difference between DC plans and pension plans….and if, by referencing trail commissions, you mean 12-b-1 fees, those fees are substantially less than a fee charged by an advisor
This is a hot topic for us. I share Debi’s concerns and would encourage any organisation currently engaging their pension advisers on a commission basis, to review their arrangements sooner rather than later, to ensure that members are getting the best possible value for money. I am a great believer in there being exceptions to every rule but in this case, I think the exceptions will be few and far between!
Thanks DOD!
We know of a large GPP set up in this way that is being certified right now as a Qualifying workplace plan for auto-enrolment.
We see trail commission as more damaging than consultancy charges and wonder whether the taking of trail, especially on deferred pots is to anyone’s long-term benefit other than the adviser’s.
test
Quantum rather than label please. Can it be right that a remuneration of the same quantum is charged from the after tax income of the individual plus VAT rather than from a tax favoured product
Sorry but I have to disagree with this extremely poorly communicated argument.
First of all I would like to understand what is Debi concerned about is it initial or trail commission and also ask if it is advisers or providers that she is targetting. Probably the answer is both to both questions.
So lets start with the providers and ask why in the last 6 months of 2012 suddenly very attractive commission terms were bieng offerred. The key being the initial commission terms not trail commission. So it was possible to re-write a scheme improve the terms for the client and for the adviser to be handsomely paid for the exercise. Greed was certainly involved. But who had the greatest appetite?
Then looking at trail commission or consultancy charging what is this for? To cover the cost of the ongoing service I would assume. Will it cover the cost of this ongoing service? Well surely that depends very much on what that service is. Clearly the employer is likley to require advice and assistance going forward. The individual members will also require advice which must delivered to that individual in clear and effective language.
Governance committees are laudable. However they are I fear only a sticking plaster used by larger organisations who wish to be able to say that they are looking after there employees interests. I’m sorry but if you want to make sure your employees are looked after you need to make sure that each of their unique requirements and individaul objectives are properly addressed at the MICRO level. That way you might just achieve your objective (a big assumption on my part) of ensuring they achieve a comfortable retirement.
It doesn’t really matter how advice is paid for. What really matters is that the advice provided is high quality, appropriate to the recipient and value for money.
cialis at age 70
cialis online
erectial disfunction
– buy cialis
cialis 20 mg 8 table i forgot my password
cialis online
testagel cialis
– buy cialis
cialis headache
generic cialis cialis cvs
– generic cialis online no prescription
cialis information forum contains new posts
generic cialis cialis 20mg canada most users ever online was
– buy generic cialis no prescription
viagra from canada no prescription log out
generic viagra
your name subject comment inurl:comment/reply/2 viagra
– generic viagra
viagra 20 mg give better perfomance than 10
generic viagra
poppers viagra and meth
– generic viagra
buy viagra online in total there are
buy viagra online
viagra herbal viagra logged
– buy viagra online
ed trial pack
buy viagra online
viagra for women results previous next
– viagra online
viagra occupation
viagra online
buy genuine viagra online trusted uk
– buy viagra online
viagra and alcohol replies
viagra online
effects of viagra
– viagra online
real brand viagra no prescription
buy viagra online
cheapest generic viagra and viagra
– buy viagra online
viagra discount
buy viagra online
viagra online safety
– buy viagra online
5mg cialis cost
buy cialis
cialis from canada daily my settings
– buy cialis
viaga
cialis online
best sellers viagra cialis viagra professional cialis professional viagra soft
– cialis online
canadian pharmacy cialis 20mg memberlist
generic cialis cialis buy you cannot delete your posts in this forum
– generic cialis no prescription
cialis side effects cialis vs viagra log-in
generic cialis erection cialis gel
– buy generic cialis
hazard of viagra
generic viagra
viagra professional
– generic viagra
online viagra softabs
generic viagra
viagra generics log in
– generic viagra
female cialis
generic cialis cialis & cheap
– generic cialis no prescription
cialis lawyer ohio
generic cialis cialis dose mg no registered users and
– buy generic cialis online
high blood pressure and ed
generic viagra
how does viagra work blog.php?do=
– generic viagra
can you use viagra two days in a row
generic viagra
viagra 20mg review you cannot delete your posts in this forum
– generic viagra
levitra side effects levitra vs viagra gaestebuch.php
viagra online
viagra 20mg online you cannot post new topics in this forum
– viagra online
viagra 10 mg 4 tablet joined
viagra online
viagra sample
– viagra online
can a woman have effects with cialis
generic cialis cialis 5mg cost registered users
– cialis canadian pharmacy online i forgot my password
cialis coupon free trial search titles
http://cialisgeneric-us.com – generic cialis cialis information logged
– buy generic cialis no prescription
taking cialis daily
buy cialis online buy cialis online
– cialis no prescription
can cialis for women
generic cialis alcohol and ed
– buy cialis no prescription
geneic viagra
buy viagra online
viagra & cheap
– viagra online
vendita viagra
viagra online
viagra custombbs.cgi
– generic viagra
Yes, there is a difference between DC plans and pension plans. The best way to use your money for reinvestment is utilizing the money in stocks and shares that will earn you a relatively good profit later on. The best sectors to invest in the stock market are penny stocks, lithium stocks, healthcare stocks, ASX stocks companies. The best advice is to follow various stock market news website and do various discussion forums.