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Elephants on the trail

Towry Law’s chief executive’s justification for taking “up to £6m annually in trail commission’ from the funds of 300,000 investors for whom he admits he provides no service whatsoever highlights two elephant-in-the- room questions which many fund industry participants previously concealed from consumers, namely:

1: Can anyone defend a fund charge “for advice” if the fund is bought and held without advice?

2: What self-serving argument will any fund investment group grandee deploy next year, after the FSA publishes its RDR policy statement finally signing the death warrant for the trail commission component of fund annual charges, to justify not lowering the annual charge by trail’s 0.5 per cent to the honest cost of managing my money, that is, 1 per cent?

Bruce Dalton
London W5

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  1. Ian Simpson APMI Chartered Financial Planner 11th December 2009 at 2:39 pm

    I recall that “trail” commission was never specifically introduced to assist with any ongoing advice,servicing or any other aspect of treating clients failrly. It was brought in by the large Insurance companies and others as a reaction to the consequences of disclosure of commission. The sales of with profit bonds had mushroomed and extremely large upfront commission on offer to IFA’s and others was seen as an opportunity not to be missed. Equally, once disclosure bit, the offer of enhanced allocations given to a sector of the IFA market if initial commission was reduced, increased rapidly the take up of renewal commission.

    Martin Fishburn is spot on with his comments about IFA’s not wanting the task of servicing large client banks, but eyeing the trail commission with far greater vigour. When WP Bonds were in vogue it was wonderful to have a proportion of your overheads covered by trail commission, and it also became a vital element in valuing an IFA’s business.

    Mr Fisher’s claim that he cannot trace clients from whose investments Towry Law receives trail commission is either a damning statmement on his firms back office or evidence that his PR is handled by the same firm which advised Mr G Brown to state he had abolished boom and bust.

    IAN SIMPSON
    Leicestershire

    ps Please if you use this do so anonymously as I am currently out of work and don’t wish to strike a wrong note with IFA’s….

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