Trail commission: How to get yours back

5th September 2011

Ivan Massow's traces trail commission charged by IFAs on various types of investment policies. It promises to repay 80% of any trail commission it discovers back to consumers, and keep the remaining 20% as a fee.

"Trail" or renewal commission of up to 1.5% of the value of an investment each year could be paid to the IFA who set up the policy. It's intended to cover the cost of ongoing advice on products including with-profits bonds, pensions, unit trust and endowments, but in practise many consumers don't receive any further advice from their IFA.

Massow says that trail commission could amount to more than £60,000 on a typical pension policy. Investors will simply have to provide their policy details online and complete a form authorising to contact the product provider.

It will then find out how much ongoing commission is being taken from the policy. If no trail commission is found on a policy then the consumer won't have to pay a fee.

Trail commission has been looked at by the FSA and rules regarding the commission will be changed under the Retail Distribution Review which comes into effect in December 2012.

However, existing policies will not be affected by these new rules when they are implemented. cites several examples of consumers who could benefit from recovering trail commission. 

One example is a self-employed professional in his late 30s with a personal pension plan of £120,000 and ongoing premiums of £1,000 a month, a life policy of £100,000 for which he pays £8 per month, and a stocks and shares Isa worth £50,000.

Massow calculates that these investments generate £852 in trail commission each year which means £682 can be returned to the consumer with £170 (20%) going to Massow as a fee.

The firm itself won't offer any financial advice but can put consumers in touch with a relevant IFA if necessary.

The website's launch prompted a debate on IFA trade paper Money Marketing ‘s website about whether the scheme is actually legal.

Huw wrote: "I hope this type of thing isn't going to be feature of the post RDR landscape. The scheme appears to be illegal, unprofessional and sensationalist. Hopefully the FSA will act swiftly."

Meanwhile R Mack described it as an "ambulance-chasing" scheme while Steven Farrall questions Massow's sums and says the site should be referred to the Advertising Standards Authority.

Massow is certainly a colourful character and no stranger to controversy. In the 1990s he fronted an IFA firm which specialised in advice to gay clients after insurers hiked premiums amid rising HIV rates.

At its peak the company was worth more than £20m but a disastrous tie-up with Zurich saw the business fold and Massow lose a court case against the insurer. He also unsuccessfully ran for London mayor in 2003 and has been treated for alcohol addiction.



Pensions: How to age proof yours

Get advice–  Find an independent financial adviser.

Budget – work out what you need to support yourself in retirement using the Money Advice Service's budget planner.

Further reading:

Pensions: Is the government doing a Brown

The Pensions Advisory Service also has some information as has the website of the Government created pension scheme Nest.

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