The vast majority of IFAs do nothing to earn their trail commission and they should have it taken away by product providers, according to retail fund distributor The Money Portal.
Managing director Richard Craven, who is currently in talks to buy a number of IFA companies, says product providers should pay only up-front commission to the 90 per cent of advisers he believes do “absolutely no ongoing admin” for clients.
However, he concedes that most product companies are unlikely heed his advice but believes IFAs should not be allowed to continue being remunerated for such little work.
Craven says: “Ninety per cent of IFAs do nothing in the way of ongoing admin. We are just saying to providers – stop paying trail to them, only give them up-front commission. We will irritate a lot of people but there is a lot of greed out there.”
Craven has also revealed that he is in talks with a number of major fund managers about taking over the ongoing admin of their direct client books.
He admits that the work which would be involved – especially with the more established players with hundreds of thousands of clients – is “colossal” but says TMP can run the books for 0.5 per cent, which would come out of the annual management charge.
Craven claims that outsourcing, can fund firms millions of pounds by scaling back their helpdesks, call centres and parts of their admin operations.