View more on these topics

Ivan Massow to back trail commission test case

Barclays Wealth may face legal action backed by trail commission reclaim service Massow’s over claims it should have provided ongoing advice to receive almost £10,000 in trail, according to reports.

The Financial Times reports that Massow’s, launched by former IFA Ivan Massow (pictured) in September, is prepared to fund the case on behalf of Leicestershire investor Richard Muston.

Muston had £9,800 deducted from an Aviva fund which was paid to Barclays Wealth in trail commission.

Massow’s director and chartered financial planner Sarah Killick told the FT  it appeared Muston was not given a portfolio review of risk-profile check since 2004 when he first invested £200,000. The money was invested through a Birmingham IFA which was later taken over by Barclays Wealth.

Muston says he was not aware the trail commission was being deducted until recently. The case is thought to be the first of its kind.

There is no regulatory requirement to offer an ongoing service in exchange for trail commission, which is often taken as an alternative to a higher upfront charge.

In a statement to the newspaper, Barclays Wealth says: “In line with industry practice at the time of the sale, Barclays received an upfront fee for advice, and trail commission of 0.5 per annum from Aviva for the sale of this product, deducted by Aviva from the fund.

“Mr Muston was fully aware of this arrangement and he signed a document to that effect, which clearly laid out the guidance on trail commission. Again, as per industry practice, the trail commission was not for advice – though, by the nature of his relationship with Barclays, Mr Muston was entitled to advice as a matter of course.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Yipee!!! Another misselling source of income. I tell you this, never mind giving financial advice for the next 5 years dump your RDR exams and head for the gold in them thar hills! Start making complaints about the lack of service ongoing provided by banks etc. Where`s my shovel?

  2. @hugh jeego – I’m laughing but really I ought to be crying……

  3. Let us have more facts on this one. For example, how many times did Mr Muston make any attempt to contact his “financial adviser” to seek such a review? There has to be some responsibility put on the client to raise concerns if he has any. There is nothing in the above which suggests that the client had such feelings at any time since 2004 which for an investment of £200,000 I find astounding. Now the concern is over 7 years of 0.5% for which he would have been advised about at the outset. I am not excusing BW here just raising the point that it is a “two way street”.

  4. Does Massow risk the worry that if he is successful, the outcome maybe that providers only pay trail commission where there is advice? In which case his business model will be torpedoed.
    It does appear to me he is publicity hunting, perhaps his new venture is appearing harder than he first envisaged.

  5. It may be possible to argue that 0.5% is a relatively low percentage, but it is NOT a small amount. £10,000.
    I am currently studying the CSII Ismamic Finance Qualification. I have not got very far yet, but one thing I have learnt is that “Riba” does not mean interest per se, it means excessive reward compared to little or no risk.
    I think it might be said that £10,000 per annum for doing nothing might well fall in to the category of Riba.
    Now to be fair to the original adviser and so I don’t appear “holier than though” I do have some customers (notice I don’t refer to them as clients)where I receive trail and they do not receive any significant ongoing service. That is THEIR choice as we gave them the option of becoming clients when we amended our working practices several years ago in preparation for RDR and the commission ban.
    I will not rebate the trail, simply because they are free to transfer the agency to anyone including Mr Massow should they wish to do so.
    But in so doing, they need to recognise the fact that professionl negligence from then onwards DEFINATLEY lies with the new agent.

  6. @ David Scrivens – That is a very good point re trail. I don’t think the insurers will get away with turning off trial if agency is transferred and advice is being provided, but it would be very simple for an insurer to amend their terms so that on agency transfer, if advice isn’t given, trail is switched off and either kept by the insurer, rebated to the client OR a balance between the two achieved, i.e. if trail was 0.5% and no advice is bing provided, only pay the NEW agent 0.1% and rebate the balance to the contract.
    We liver in very interesting times.

  7. Ismamic Finance Authority 28th November 2011 at 12:01 pm

    Is that what IFA stands for these days.

    GIFA

    What does that stand for then 😉

  8. What a gay day!

  9. We don’t live in interesting times as the old chinese curse goes, we live and work in a very frustrating environment, where everything we do, everything we say and everything we don’t do is now able to be called into question.

    The trail commission issue is being misunderstood or at worst deliberately misrepresented, the contract to pay trail is between the adviser and the provider who does not have the right to turn off trail in any circumstances under the law of contract.

    I agree that if we take a trail commission there should be a level of service provided, but let us not forget that there are passive costs to our industry which have to be paid for, maintenance of premises, staff costs, PI insurance, everyday running costs and just because a client does not receive information or seeks ongoing advice per se, it does not mean trail is money for nothing, to m aintain profitability the income of a practice needs to be maintained and generated somehow.

    The maintenance of the practice means that at any time clients can come back for further advice and services without having to pay up front fees again.

    Unfortunately the genie is out of the lamp now and is never going to go back in.

    I can see a time in the very near future where any business wishing to sell up will actually be worth nothing unless the business is part of a large network which in turn owns the trail commission in any event if the agent is just an agent and not an AR so can easily move clients over to another adviser.

    Is that the way we should allgo ?

  10. I remember back in the early/mid 90s making a conscious decision to stop taking 5% upfront on lump sums in favour of 3% plus 0.5% (with no difference to the clients charges in most eg Bond situations), mainly because it made more commercial sense to my business over the long term. There were no formal or contractual “servicing” agreements or structured servicing propositions widely in place at that time, but just an undocumented understanding that both sides would meet periodically, usually annually, to look at things. At the time, if we’re honest about it, most “advisers” (although I think we were sales people back then?) wanted to see clients pretty regularly as that was the opportunity to develop additional new business. The review was very much part of the new business creation meeting rather than a professional stand alone service in its own right. It wasnt “wrong”, or “illegal” and it certainly wasnt lacking anything that those salespeople who took 5% upfront offered, but times have changed and as usual (in our business uniquely) practices that were in place and acceptable 10 to 15 yrs ago are at risk of being judged by todays standards. As has been said above, contractual law must surely apply, and there was no contract to service with the client, and if nothing illegal was done at the time what are the grounds for such a claim?? If what we have or havnet done over the last 20 years is now to be judged by post RDR standards or rules, then we all probably face ruin.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com