Ever the shrewd media operator, Ivan Massow managed to garner an impressive amount of national newspaper coverage for his new venture.
“As a former IFA, it pains me a little to turn the tables on my own industry but the trail commission scam must stop,” declared Massow in the Telegraph.
Massow thinks he has spotted a great business opportunity for himself in creating a company to unlock the trail commission paid to advisers who offer no ongoing service to their clients.
His firm will cream off 20 per cent of any trail commission recouped for the investor per year in return for facilitating the rest of the trail being returned to the client. The firm will not operate as a regulated adviser and will refer clients needing advice to an IFA.
Regulators past and present have allowed a mist to develop around the role and purpose of trail commission, with some advisers agreeing with clients that trail is purely an alternative to a higher up-front commission while others have agreed that it comes with specific responsibilities to provide an ongoing service.
Questions may well be asked about what service Massow’s company provides to justify taking the 20 per cent of trail per year, beyond the initial paperwork, especially given the regulator’s increased focus on ongoing service after 2012.
The numbers plastered all over Massow’s website appear to be exaggerations of the norm designed to shock consumers and create scandalous headlines.
For instance, it quotes advisers taking 1.5 per cent trail and provides a case study where an adviser is taking over £5,000 a year from a pension fund without providing a service. Its suggestion that a typical client could save £60,000 looks very high if you consider average pension pot sizes.
But most advisers should have nothing to fear from Massow and other “entrepreneurs” who will no doubt look to make a fast buck off the back of the dramatic regulatory changes being introduced as part of the RDR.
A few clients will always be enticed by offers of getting something for nothing or a free service and may use this opportunity to ditch their IFA. But those who cannot be convinced of the value and benefits of advice are hardly likely to be key clients and may well be losing more than the adviser in severing the relationship.
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