Thank you for your long and detailed comments on the item on Money Box about trail commission and on other matters.
You objected to the phrase ‘one of the industry’s best kept secrets’ to describe trail commission.
Let me refer you to the 15th report of the Treasury Select Committee published by Parliament on 6 July 2011. This link takes you to section 3 on commission. If you scroll down to paragraph 46 in particular you will see that the committee heard that under half of recent personal pension purchasers knew if their adviser took trail commission “only 46 per cent are aware of whether their adviser received trail commission”. GfK research for the Financial Services Consumer Panel found that “while most consumers were aware that financial advisers were paid by way of commission from providers, the majority were unaware of the existence of trail commission at all”. Under the FSA disclosure rules of course 100 per cent should be aware of it and what it is for.
As you know, the FSA is so concerned about trail commission being charged when no service is given that it is banning it altogether for new contracts from 1 January 2013. It will also insist that any IFA who receives trail commission from that date under an older contract earns it by providing a service*. The FSA would not be taking such action if there was not a problem with the service being provided by a significant number of IFAs.
My own discussions indicate that very few people who are not involved in financial services as journalists or in other ways have heard of trail commission. Indeed, when I have talked to people in the last few weeks about Massow’s venture the first reaction from almost all is ‘what is trail commission?’ followed by a certain incredulity when I explain.
Of course in the pages of documentation the percentage amounts are there. But they are easily overlooked and the figures above speak for themselves.
You make the point that you are quite open and upfront about trail commission and do a lot of work for it. I have no reason to doubt that is true. Many IFAs are like you in that respect which is why I asked Ivan Massow:
“But there are good IFAs, aren’t there, and there’s a growing number of good IFAs who offer continuing advice for this money? Why should you be trying to take their business off them?”
I challenged Massow in other ways, reminding people for example that a previous business of his had, after he had sold it, gone out of business and asked:
“What will people do if this one doesn’t work as you hope it would? Will they lose anything?”
But I must remind you this was not me debating with Ivan Massow. I was asking questions, partly based on emails and tweets I had received. That is my job. The person invited on the programme to put the other point of view was Brian Dennehy, a Director of the IFA firm Dennehy Weller.
I really do recommend that you listen again to the item on our website or read a transcript of it here. Now that I have done so I am happy that, in the six minutes we gave the item, it was a balanced presentation of Massow’s idea challenged by both me and Brian Dennehy.
I am sure you would agree that there are IFAs receiving trail commission for which little or no work is done, some on contracts that date back many years. As the Select Committee concluded “Trail commission where advice is not offered is very difficult to justify.” (para 49). I am sure you would agree with that statement.
So I do not believe that to call trail commission a ‘secret’ slanders the industry at all. It just describes the current position of the industry as a whole.
Let me deal briefly with your other points which, as far as I can see, are not related to this Saturday’s Money Box. You suggest that I and the programme try to ‘engender mistrust’ of the financial services industry. That is simply not true. Of course we encourage anyone who is seeking financial advice to approach the meeting with a healthy scepticism. I am sure you would agree with that. At Money Box and through my twitter account I get enough examples of bad financial advice to make me sure that is the right approach.
We also encourage everyone who needs financial advice to find a good independent financial adviser – that phrase appears on Money Box and Money Box Live many times in the course of the year.
How you can think I recommend people get ‘something for nothing’ entirely baffles me. I have advocated paying for advice upfront for many years. That is not something for nothing. It is something for something.
Two minor points in your email.
I do not purport to be a ‘consumer champion’. I am a consumer journalist, so I do see things from a consumer rather than an industry point of view.
You refer back to the collapse of Northern Rock. If you check the transcripts you will find Money Box took a very different line from the one you recall. On the programme on 23 February 2008 we discussed putting savings into Northern Rock for precisely the reasons you give – see http://news.bbc.co.uk/1/hi/programmes/moneybox/7258552.stm. And when the queues were round the block some months earlier our programme of 15 September 2007 clearly said at one point that those savers were not behaving rationally. Again the transcript is available via this page.
As for your offer of a debate we had a debate on Ivan Massow’s new business on Saturday between him and Brian Dennehy. I do not debate on the programme. That is not my job. I put tough questions to people on all sides of the argument – that is my job. A broader and perhaps more interesting idea in the run up to 1 January 2013 is a debate between opposing sides on financial advice and remuneration. If we staged that then I would be putting tough questions to both sides. There are, as you know, strong arguments for and against the end of commission.
Meanwhile, I see no reason to apologise and no record to set straight. Your single complaint about Saturday’s programme is the phrase ‘one of the industry’s best kept secrets’. For the reasons set out above I believe that description of trail commission to be true and justifiable.
If you wish to pursue a formal complaint through the BBC then you can of course do so.
*The FSA has clarified it position and says that if the existing adviser has a contract for trail commission which does not specify a service is carried out for that commission, then that contract will not be changed. So an existing adviser with an existing contract will be free to collect trail commission each year and not offer a service. However, if the contract is re-registered with a new adviser then the FSA will expect the new adviser to carry out a service in order to receive the trail commission.