The other day, I had the benefit of a new virus, which disabled my pc, but
the support I received from the technical desk at my anti-virus software
supplier made me feel quite relaxed about a very serious problem.
In contrast, the attitude of some product providers still leads a lot to
be desired and an increasing argument seems to centre on compensation paid
to the IFA for the provider's mistakes.
Some companies even refer to non-existent PIA rules as their “get out of
jail” card while, on the other side, some IFAs have little evidence to
support their claims for maladministration.
What we need are some clear rules in this area to cover the points most
often in dispute the time spent and the hourly rate charged.
An IFA on a commission-only basis is at a disadvantage here for reasons
that I will explain in a moment.
Several companies claim that the hourly rate is subject to a cap imposed
by the regulator.
This is not the full facts, the regulator does not want to see an IFA
getting paid in excess of his normal hourly rate by a provider even where a
complaint has been made against them.
The reasoning behind this must be linked to the “enhancement of
commissions” and the legendary £25 per registered individual.
What is needed is a set of rules which fairly compensate the IFA where a
specified form of evidence is supplied and based on an hourly rate which
relates to the business in question, and is not open to adjustment by the
I would be happy to offer my services to set up such a system and would
invite interested parties to write to me at the email address at the end of
Hopefully, if this idea gets off the ground we can avoid some of the
unfair negotiations, which have been occurring of late. Avoiding such
incidents can only help IFAprovider relationships.
We could establish an independent arbitration service, avoiding the
providers being put in the awkward position of beingboth judge and jury. By
setting out a method of arriving at hourly rates for advice, admin and
travel with a method for validating existing charging scales we can avoid
the regulatory issues at a stroke.
We then need to consider the audit trail needed to support such a claim
and this is where I suspect that some IFAs may find my suggestion
unpalatable, given the extra documentation that could be said to be
This is an objection that I would have to reject as any IFA wishing to
remain compliant will have realised that file notes and notes that are
timed and dated are essential in any good practice.
These notes can also be utilised to explain to clients just what is
involved in giving compliant and accurate advice in the current regulatory
By setting up this framework the time spent in arguing can be put to more
productive use to the ultimate benefit of both parties.
Returning to the subject of unfair behaviour I found myself with an
Equitable Life client who had been opted out by Equitable Life and then
compensated by means of the compensation being paid into the with-profits
personal pension plan set up when she opted out.
She now finds this money discounted by 16 per cent, so if we assume that
most of the missold pension plan holders were in with-profits, then
Equitable Life has just reduced its bill by a minimum of 16 per cent!
If this is to be allowed unchallenged, then many more product providers
could reduce their liability in a similar fashion.
Robert Reid is principal at Syndaxi Financial Planning.
If you would like to discuss this article or other topics with Robert
Reid, please email him at email@example.com.UK