I visited some clients yesterday evening whose with-profits low-cost endowment had matured late last year, fractionally above target.
As a bonus, they had already cleared their mortgage from other resources, so a nice man from Legal & General had taken the trouble to pay
them a visit at home to deliver their cheque in person. What service, eh?
Said representative then proceeded to persuade them to reinvest as much as he could get out of them into two new L&G products, a multi-manager unit trust and a two-year cash-based bond, all without the benefit of a fact-find or anything in the way of a personalised letter of recommendation, still less any sort of attempt to establish their objectives in making these investments.
Apparently, he had leaned on them quite hard to invest more than they actually wanted to. All on his very first and one and only visit.
And the commission – 6.5 per cent on the unit trust and 4 per cent on the cash-based bond. Now, consider just what an IFA would have had to do for a similar pair of sales, what commission he would have taken and what the FSA would have to say about the absence of even a letter of
recommendation recording such fundamentals as attitude to investment risk and risk warnings. Oh yes, the FSA would probably have taken a dim view of such levels of commission as well.
Is there not a somewhat gaping chasm between these two approaches? Yet this is happening every day of the week, right under the nose of the FSA.