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FSA refutes Fisher’s TCF trail accusation

The FSA has rejected Andrew Fisher’s claims that advisers using trail commission to offer an ongoing advice service to clients are breaching treating customers fairly principles.

In an interview with MoneyMarketing.co.uk earlier this week, Towry Law chief executive Andrew Fisher (pictured) argued it was in breach of TCF principles to keep advising clients while receiving trail commission from providers.

Fisher has been a vehement critic of commission but last week admitted his firm takes £6m in trail every year without offering ongoing advice.

He says: “The whole purpose of trail commission today, if it is not a deferred up-front commission, is to increase persistency. If someone is incentivised to keep a product with a client then that would be in breach of TCF principles.

“Clearly the industry has got it horribly wrong if they think trail commission is there to service clients. It is so wrong it is extraordinary.”

But an FSA spokesman says: “If a client is paying trail commission and is receiving further advice from that adviser I cannot see where a TCF breach would be. We would want to see clients in that situation receiving ongoing advice.”

Towry Law saw a pre-tax loss of £10.6m for the year ended December 31, 2008, plummeting from a profit of £812,000 in 2007. Fisher says the firm is set for a £20m profit for 2009.

In October, Towry bought the UK subsidiary of Edward Jones, which made a loss of £35m last year, for £1. Fisher says Edward Jones comes with capital adequacy reserves although he would not disclose the figures involved.

CandidMoney.com founder Justin Modray says: “The existence of trail commission should give advisers a financial incentive to continue looking after clients and it empowers clients by allowing them to take their custom (and trail commission) elsewhere if they feel their adviser is not providing satisfactory service.”

For more on the subject, see this week’s issue of Money Marketing.

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Comments

There are 46 comments at the moment, we would love to hear your opinion too.

  1. Sounds like the ultimate solution to the requirement of consumers for ongoing advice!

  2. At last Fisher’s over-bearing ‘holier-than-though’ stance has been shown to be wrong.

  3. You must be joking 18th November 2009 at 11:10 am

    The “FSA Spokesman” gets my nomination for a Knighthood in the new year’s honours list!

    At last, some common sense!

    Now all we want is for Twonky Law to be hauled over the coals for thiri slanted view on TCF – i.e. taking trail and doing nothing is better than taking trail and servicing – and for Fisher to be dismissed without delay.

    Then “the pinks” will stop publishing this man’s moronic comments!!!

  4. hahahahahahahahahahaha! stick that in your pipe and smoke it fish-face.

    Oops perhaps I am a little harsh and unprofessional with that comment. Never mind, i’m making it anonymously.

  5. Maybe Fisher would like to repay the 6 million is it is so wrong. Like a man that puts his money where his mouth is and standbys principles. Or is it he going to pocket the cash.

  6. Mr Fisher needs to give up all his trail commission then, I would recomend any client of Towry Law to transfer their trail to an advisor who is prepared to give ongoing service and advise,. that would be TCF.

    This whole RDR, TCF, CP121, Menue, Polorisation, has run its coarse, for crying out loud. If the FSA want rid of the true IFA, just admit it and let us all leave the profession and do something else.
    IF IT AIN’T BROKEN DO NOT ATTEMPT TO MEND IT

  7. Nice one FSA! (Never thought I would write that!)

    Is there a book running on how long Fisher will last? If so, could I put £5 on Tuesday.

  8. Neil F Liversidge 18th November 2009 at 11:13 am

    Well, it’s nice to see somebody at the FSA has some common sense. I think we can put Andy’s last utterance down to a panic-induced spasm. Caught in a net of his own weaving, The Fish is thrashing about wildly, flailing his tail in every direction, but it’s only a matter of time before he’s landed and turned into sushi!

  9. Will he be required to pay back the £6 million for not giving on going advise.

  10. In 1997 I hosted a providers conference which discussed amongst other things trail commission. In two contributions which followed each other. One provider rep declared that the commission was deferred initial the other was that it was a servicing fee.
    Embarrassingly they were from the SAME provider!

  11. This is the sort of “doublethink” that belongs in George Orwell’s 1984. Either way, Mr Fisher is wrong by his own principles, or wrong by any measure of fairness (the 2 do not necessarily coincide).

    By Mr Fisher’s principals, if you take an ongoing commission you shouldn’t give advice based on that remuneration – so you would logically have to charge a fee on top. How would this be treating customers fairly?

    More to the point, what are the FSA doing about a company receiving £6m of client’s money and stating it would be wrong to provide any sort of ongoing service to them?

  12. Punch him in the face 18th November 2009 at 11:15 am

    So Mr Fisher, who last week stated Towry Law receives between £6m-£10m p/a for renewal commission for clients they’re “unable to trace” thinks trail commission for on going advice breaches TFC principles.

    I WONDER WHY?

    “deferred up-front commission” So how many clients who currently pay you trail commission didn’t pay an initial fee?

    This guy makes my blood boil. The actual principle of trail commission for on going advice is about as “TFC friendly” as you can get.

  13. I used to work for Towry Law, and do not feel the need to be anonymous. It’s funny but no-one I meet in our industry ever asks me why I left, they just seem to know………..

  14. Such a statement from the FSA rather strongly suggests that Mr Fisher is going to have to have a serious rethink about the way in which TL treats the various client banks it’s acquired over the past few years.

    A central pillar of the FSA’s input to the debate about trail commission is that firms must be seen to be doing something, on a regular basis, to justify it. Mr Fisher’s attempts to argue otherwise are entirely specious. How can it possibly be acceptable for any firm to receive £6m trail commission every year and be under no obligation to do anything for it?

    Towry Law’s next compliance visit from the FSA should give rise to an interesting discussion on the subject.

  15. I have always found Mr Fishers comments odd and at comflict with what has been happening in TL from 2006-08.

    We have inherited 2 clients (ex TL) and both have investments bonds where the maximum commission was taken at 6% & 7% respectively. No ongoing advice offered ever even though the recommendations letters recommend it.

    When the clients wanted a review due to the credit crunch and contacted TL they were told that they would have to pay an additional fee as no ongoing fees were being received from that client.

    As a small IFA I am sure I am not the only one and there must be lots of examples of this practice around. Admittedly this may be before Mr Fishers time at TL. However Mr Fisher may want to appear a maverick but he may want to be careful of the skeletons in his own closet as the company he respresents has far from a clean past.

    Hence that may be why many edward Jones advisers have reservations.

  16. Is it not true that the introduction of trail commission was the catalyst for IFA,s to adopt this practice because the valuation of their renewals was the yardstick to which they valued their business and had nothing to do with service, service became the excuse.

  17. As we all thought…how can such a high profile industry figure be so ill informed and wrong headed on this?
    To paraphrase him ” clearly he has got it horribly wrong…it is so wrong, it is extraordinary!”

  18. With a loss like that last year it can’t be long before Towry Law goes bust. I am always suspicious of companies that stick their head above the parapet in a righteous manner.

  19. Surely after such a public rebuke from not just his peers but now the regulator, and attendant embarrassment to his company, Mr Fisher’s position at Towry Law is untenable?

  20. Surely in many cases there is a choice, full fee from the provider or smaller fee and trail. Having made the choice in the interest of our client to take less immediade and the remainer over a period of time are we now to loose the trail retrospectivly?

    Does the FSA realise that treating customers fairly has to start with the FSA treating IFAs fairly if it is going to work at all?

  21. Once again Towry Law prove themselves to be full of self interest and ill informed double speak.

    I suggest if they are not servicing their clients whilst receiving renewal commission it proves the principals by which they operate.

    I hope you are taking note FSA?

  22. Now he’s been shown to be a complete idiot by the regulator and it’s also been demonstrated that his understanding and opinions on TCF and RDR are completely wrong – WILL HE PLEASE NOW SHUT UP!!!!!???
    If I worked at or was on the board of TL I would be demanding that this guy goes. He’s made the whole company look like idiots. He’s also tried to gain himself an advantage in teh industry by making out that he was wonderful and the fountain of all knowledge while we are all a bunch of crooks.
    It’s fantastic that this has all backfired and that he has been shown to be just an idiot with a big mouth. If TL have any sense they’ll give him the boot before he makes them look even more stupid and even more non-compliant (if that’s possible!!)
    In addition to the abvoe, what worries me is that TL are a company who lost millions last year and have just taken on a company that also lost £35m last year. Obviously they couldn’t pay back this £6m trail even if they wanted to.
    This raises the question of what pressures are on the staff in terms of the advice they give. It would seem that they really need to start bringing in high levels of revenue to get themselves out of a big financial hole. Once advisers are under this sort of pressure it does start to raise questions about the quality of advice given.
    Perhaps the FSA should start taking a closer look at this firm……first of all thay have no understanding of TCF & RDR. They’re taking £6m a year in trail and believe if would be against TCF to then look after the clients they’ve earned this money off and they’ve made massive financial losses and taken on another firm in the same position. How can they possibly achieve TCF in these circumstances and, if they can’t achieve TCF should they be running as a firm? FSA, over to you.

  23. So my opinion of 16th November is vindicated.

    By the way, I am a member of the Institute of Chartered Acccountants in England & Wales who tell us that in law all commission – whether initial or trail – belongs to the client, whose consent is required before the adviser retains it. Is Towry Law complying with the law in keeping this commission?

    I remain disappointed at the number of anonymous postings to this site, many of them silly. Could I please ask Money Marketing to review its policy. By removing anonymous postings we are likely to have fewer, and more intelligent comments.

  24. Towry Law say they are fee based on the one hand and on the other they’re taking 6 million a year commission……….they can’t have it both ways. How can Mr F argue that fund based commission incentivies staying with the current provider. Is he a politician? i.e. Makes no sense and nobody can work out how in the hell he got to position he’s in.

  25. Perhaps Mr Fisher will now keep his mouth shut, or better still leave this industry.

  26. there are significant number of companies, e.g. Prudential and Zurich who will not transfer trails commissions away from the original company even where client is now advised by a different company

  27. Neil F Liversidge 18th November 2009 at 1:13 pm

    It really is amazing. I wonder what the FSA’s inspectors make of a man running a large firm who has such a blind spot? Isn’t this CF1 level stuff? How can somebody in his position get such a public slap in the face from the FSA have such a brass neck as to remain in his post? The self-delusive capability of The Fish is breathtaking. So, now we know: Andy is right; the rest of the world is wrong. Have you got that folks?

  28. £20 to service a client (£6m divided by 300000 clients)…….come on we are professional advisers. Mr Fisher’s point is that if you are ‘servicing’ a client where trail is paid their is a potential conflict of interest – bit like Halifax offering proc fees on mortgage retention deals. Is it really best advice ? Potentially not. £20 per month & you might begin to generate sufficient funds to cover a review meeting but clients need to be aware that quality financial advice costs money.

  29. Its great to see common sense applied here by FSA. If we receive trail commission we service our clients and all our very happy with us for doing this

  30. Clearly if TL are pocketing £6m of trail commission and publically admitting they are not servicing those clients…… then they in breach of TCF!

  31. Given Toady Law’s losses of over £10 mil in 2008, then it’s little wonder that this clown refuses to repay the £6 million his company is receiving for doing absolutely nothing!

  32. Robert Walton – (£6m/300,000clients) = £20 to service a client.

    What then is the average clients investment at 0.5% for fum. £20 I calculate equates to funds under management of £4,000 hardly I suggest the traget market for TL. It begs the question are the client figures correct?

  33. Ivory Towry Laws fall from grace 18th November 2009 at 2:13 pm

    Mr Fisher must be feeling a draft in his glass house now that the windows are knocked in! Did any one mention to Mr Fisher to be careful who you walk on, on your way up because you may have to pass them on your way down!

    Fisher is to be seen by the Towry Law board as the problem and not the solution. Because of Fisher Towry Law is now a laughing stock and certainly a target for ridicule! The only place for Fisher now is on the main board of the FSA!

  34. Rants from both sides, all trying to justify their stance.

    Take a step back here. We really need to look at early policies written against more recent client dealings. 15 years ago there was never any demand at all for future service levels to justify income – however right or wrong that was. Hard disclosure told a client what and how his ifa would earn. Indeed, a number of old direct sales type offices built up their ’employees’ retiral income based on the long term contract renewal income base – does anyone advocate now that their ‘pension’ is taken away?

    I would bet 99% of posters here have some bits of trail on some old plans that they dont work for.

    Leave ‘old’ costed business out of the argument. It will wither on the vine as contracts mature or are rebased on to better alternatives.

    We should be demanding that service levels ge given to all cleints where plans generate repeat income from a specific date. I would advocate this was set perhaps retrospective from c Jan 07 from when there is no excuse.

    To appy retrospective thoughts to this issue will only provide the FSA with a stick to criticise all of us in some way. For goodness sake we have seen how much they like applying retroaspective judgments – dont give them another opportunity which is really not justified.

  35. ref Gary’s comment, I suppose technically speaking trail is deferred initial, but only to a point. That adviser has chosen to forgoe the very highest initial commision to ensure that there is an income stream in place to service the client into the future. In the past there was too much ‘rape and escape’ going on with no more advice ptovided as they had got all their money up front. Without this the client would in fact be paying twice. Once from up front commission or fee and again for ongoing servicing costs charged by the practice in the form of an ongoing servicing fee. So trail does make sense. Shame the providers dont seem to know the difference though. One for common sense though !!!

  36. David Rangely,

    I was always under the impression that under English Law commission belongs to the broker. It is under Scottish Law that commission belongs to the client.

  37. FAO David Rangely-meaning your comments for example?

  38. At least David Rangely has the bottle to put his name to his comments.

    Why do you offer your repost anonymously ?

    A most cowardly act meethinks !

  39. I work for TL in client support. For the Wealth Advisors the pressure to sell is imense. From my office I know that when we float 80% of them are going to leave because they would have made money from the floatation and think that AF is a complete meglomaniac. TL senior management demand wealth advisors bring home a very large fees generated by the work from client meetings. Well ok we now charge fees, but, TL management want all advisors to make clients pay for what is know as a holistic report. These reports are pie in the sky and just an excuse to charge more fees to the client. Further still the real crime comes from the fact that clients no longer get independent advice because all reports point to the TL Wealth Managment platform which is TL’s own investment funds. My wealth advisors hate this proposition and are put under so much pressure by management that i felt that i had to say something on behalf of them.

  40. The FSA spokesman has said:

    “We would want to see the clients in that situation (i.e. paying “deferred commission”) receiving ongoing advice”

    Well, Fisher has said that they are not!

    What is the FSA going to do about that?

  41. I really have enjoyed all the comments “fisher baiting”, because he has really asked for it as have the FSA with some of their ill thought/disproportionate comments.
    BUT in all honesty I have to agree with the anon poster 18 Nov 2009 2:29 pm and I was one of the first to highlight that £20 per annum is NOT enough to service a client (although as anotehr poster said, one does then have to question Tls claim of £6million across 300,000 clients, I wonder if that is £6 million across x numebr of policies and includes clients who they don’t receive renewals on because they ARE on a fee based model. As a result I would not be surprised if we were talking about an average of £200 per client, inc which case a 3 yearly servicing review could be met from this as part of a fair TCF plan).
    I do think MM and other On-line journalism need to have a bit of a rethink on their anon posting policy as whilst even I do it on occassion, I think there is far too much of it. Perhaps a policy of listing anons so that you have to click to read the anons only if you want to so you can either read comments from people willing to put their name and reputation where their mouth is or those who make comments (including me at times) aimed at causing a debate. I would probably still say the same thing using my own name, just be much more careful about how professional it looked.

  42. That man’s got a big foot-he should use it for keepiung his mouth shut and not for shooting himself in.
    Seriously-he doesn’t have much of a background as an IFA-I think I am correct in saying that he has never been one. He talks about trail commssion being ‘intended’ to do this or that–there has never been an intention behind its payment. I don’t think the £6M will all be trail anyway-some of it will be renewal on ongoing premiums. He should listen rather than sounding off and not put new opportunities into the Regulator’s mind for worrying IFA’s. Renewal commission helps IFA’s stay around and in business. Cleints are then able to contact their IFA with a query or for an update or on a servicing matter instead of having to negotiate the awful terraine of call centres and options buttons to eventually receive nonsense information from untrained insurer personnel. IFA’s should NOT be required to match work done against renewal received-we are providing a service without checking the clock – that’s how we have worked for decade after decade-maybe even for centuries-building up a reputation for helpfulness and not putting people off using us becuase we check whether responding to them will be financially worthwhile or not

  43. Christian Patricot 19th November 2009 at 11:08 am

    Re: anonymous, 18 Nov, 11.25pm, the person working in client support at TL.
    I used to work as a sales rep for ELAS from 91 to 96 and anyone with a bit of commercial experience could see that Mr Ranson, its CEO, was a bully and a dictator who thought he was always right whilst every one else was always wrong. It was also quite easy to see there where things that did not quite seem to add up. Yet the regulators expressed surprised at their demise and then kept telling every one all was OK at ELAS once they had closed to new business and there was no reason to move out.
    The state of affairs described by the TL employee reminds me of ELAS. The head of the organisation has a big mouth that says exactly what the regulators want to hear and in return the firm as well as the regulators seem to operate on the basis that all is fine and there is no need, and in the case of ELAS apparently no courage, for checking and questioning.
    In between ELAS in the 90’s and TL now, you can think of the likes of Northern Rock and the banks and yet the FSA does not give the impression that they learn anything. For his good work at the FSA, I think I am right (?) in believing that Howard Davies was knighted and even touted for the top job at the BoE.
    Of course it is much easier to come and bully small firms than to do so with large organisations where many of the top management are part of the Establishment with access and influence in both the political parties and the senior civil service.

  44. In response to Anonymous comment ‘we are providing a service without checking the clock – that’s how we have worked for decade after decade-maybe even for centuries-‘

    Precisely put. Just because something has been going on for decades does not make it right. Your attitude is exactly the reason why the changes need to be and are being made.

    At least Fisher is honest. He may not be an IFA, but he does appear to have a better grasp of the big picture that most of the IFA posting here. He doesn’t need to be an IFA to employ them. An architect or building contractor does not need to be a qualified electrician or plumber. The architect sees the big picture and hires the plumber to fit the pipes.

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  46. Please. Can you not see what he’s done?
    Fisher has just got the FSA to confirm that there is currently no link between receipt of trail commissions and servicing obligations…which just about perfectly undercuts what they have been trying to claim and is where RDR is heading.
    He’s effectively just protected trail commission receipts without ongoing service for all IFAs by taking the opposing stance nand running with it.
    Mr Fisher, Bravo

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