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Trail pay is right of original seller

I read with interest that Chartwell Investment Management is extending its cashback service to include refunds on renewal commission for investors in with-profits and distribution bonds (Money Marketing, December 5).

It is commendable to note that at least two insurers – Prudential and Skandia Life – refuse to transfer renewal commission to companies such as Chartwell.

It is also interesting to note that Patrick Connolly of Chartwell feels that “there are still too many advisers who believe that renewal commission is a right”.

While we as a company do not recommend many life insurance bonds as investment vehicles for clients, when we do, we have the right to choose a high initial commission, of, say, 6 per cent or select a lower initial commission of, say, 3.5 per cent and a trail commission of 0.5 per cent.

I reiterate that it is our right to elect to sacrifice our initial commission for trail commission.

As making such an election does not increase the initial or ongoing charges payable by the client, a trail commission should not be considered a servicing commission but an ongoing payment in lieu of an initial commission.

Therefore, the stance adopted by Prudential and Skandia Life is not only ethically, but arguably legally, correct and one which should be adopted by every other insurance company as the original sellers of the life insurance bonds do, in fact, have a right to this trail commission.

Ian Lowes

Managing director,

Lowes Financial Management,

Newcastle upon Tyne

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