Trail Commission Ban How Many Financial Advisers Will Close
Published / Last Updated on 04/11/2014
Video looks at the coming trail fee and commission ban for Financial Advisers, how many will close? Many banks have already closed their financial advice arms.
Transcript:
“Hello there, this is an interesting one for you to watch out for. Many of you may not be aware but lots of financial advisers, they get paid a hidden trail fee from your investments and pensions. For example they may be getting paid 0.5% per year or 1% per year, or something like that, of the value of your pension fund or investment fund.
Now, what the regulator has set in place is where these trail fees, old-style trail commissions, are being paid from a platform: so if your pensions or your investments or your ISAs are on platforms; and what I mean by platform is where you’ve got not just a choice of that pension or investment company’s funds but you have choices of lots of other companies funds. For example: it might be on a Fidelity platform but you can choose Legal and General, Scottish Widows, Prudential, Gartmore or Henderson. I could go on, Scottish Widows there are thousands of funds available or the same with Co-Funds or Transact or Ascentric or Standard Life have a platform, Aegon have a platform etc. there are lots of, James Hay is another platform that is very common for pensions, for self-invested pensions.
So if you have one of these platforms then read the small print because your financial adviser may be getting paid a hidden trail fee. [Now] the regulator has said with effect from 2016 the trail fees from a platform investment or pension must stop. So they must stop by 2016 unless your financial adviser has written to you and agreed that they can still continue to receive their trail fee or trail commission.
[So do it] if you're not our client where you know for the majority of clients we don't really take trail fees, but what we do is we issue refunds. But we do have clients who want us to take trail fees and be paid from the pension or investment policy.
If you're not with us as clients then expect some ‘surprise’ contact may be from your financial advisor, who may not have contacted you for years, because they've been happily getting paid their trail fees and doing nothing for it. So, it is coming be aware: trail fees on platforms stop with effect 2016. There are lots of financial advisers who have built up huge trail fee/commission incomes from their clients and they may even go out of business if they haven't got a servicing regime, if they don't have a program to look after you a client.
So expect some contact from financial advisers where they haven't been servicing you and they want you to sign new agreements or likewise you may even start to see some service from your financial adviser.
[And then] the final gamble which is that ‘the buzz talk’ in the industry at the moment, in the financial services industry, is: how many financial advisers who have built a model by being paid trail fees but doing absolutely nothing for it, how many of those are going to survive? And there has been talk of upwards of 25% of financial advisers actually stopping trading before 2016 because they get paid and don't do any work for it and then this hidden trail fee is going to stop.
Any questions on the subject contact us. If you do wish to start using us as your financial adviser then know that we will stop those trail fees and commissions anyway and give you very clear very transparent contracts. Thanks very much watching.”
