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.