Retired advisers could be hit hard if life offices demand indemnity commission back once an adviser stops trading.
The concerns come after Legal & General confirmed it will enforce clauses in its terms and conditions that give it the right to demand money back as a debt owed if an adviser leaves the industry during a period for which they have already been paid up-front commission.
The Mortgage Practitioner sole trader Danny Lovey has pointed out that most insurers’ terms and conditions contain similar commission clauses.
Paymentshield recently stopped paying trail commission to advisers who are no longer regulated to sell mortgage-related general insurance.
Advisers argue that commission is a reward for introducing clients to a product provider but the flip side of that argument is that advisers need to manage the ongoing relationship with their client.
Lovey says: “If this was ever enforced, it could bankrupt retired advisers in some cases with the clawbacks.”
L&G spokeswoman Berni Ryan says: “Legal & General does actively enforce the clauses highlighted in our intermediary agency agreement in relation to the clawback of commission payments.
“By signing the agency agreement, advisers are contractually due to repay any negative balance commission that may arise if a policy should lapse, be cancelled or be surrendered.
“The same process for requesting and chasing any debts is consistently applied if the adviser should go into liquidation, stop being an adviser or retire.”
Informed Choice managing director Nick Bamford says: “I would be peeved to hear that message if I thought that renewal commission was part of my pension. Advisers still retain liability even if they are not getting commission so it is a double whammy and could be seen as unfair.”