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Clerical criticised for enhanced commission offer on WP bond

Clerical Medical has been criticised for offering enhanced commission and allocation rates on its with-profits bond at a time when its bonus rates have been largely falling.

The firm is offering advisers extra commission of 0.75 per cent,
increasing its rate to a near marketleading 7.5 per cent on
with-profits bonds, with extra allocation of 1 per cent for
investments in its flexible growth bond.

Regular bonuses on Clerical’s with-profit bonds were cut from 1.5 per
cent to 1 per cent in September despite the firm’s with-profits fund
gaining 9.5 per cent last year.

Investment products marketing manager Rod MacDonald says that the
bonus reduction reflects the smoothing as equity returns were
negative for three years from 2000 and have been range-bound this
year.

Buckles head of pensions Matthew Woodhead says incentivising advisers
to invest client money in a with-profits fund paying a 1 per cent
annual bonus when cash is paying around 5 per cent and inflation is
3.1 per cent sends out the wrong message.

Clerical has also scrapped MVR-free withdrawals on divestments of up
to 25,000 and levies an MVR on withdrawals over 5 per cent, up
from 7.5 per cent previously depending on whether this was greater or
less than 25,000.

MacDonald says: “We are not robbing Peter to pay Paul. The
with-profits fund is ringfenced and any enhanced allocations or
commission payouts come out of our profit.”

Woodhead says: “Clerical Medical is boasting that it made 9.5 per
cent last year but its bonus is 1 per cent.”

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