A young chap called Julian Penniston-Hill has launched a service with no less assistance in PR than Max Clifford, whereby he will obtain and remit all of an investor's renewal commission for the princely sum of £35 per annum.
I feel that much of the ire that may have been directed towards me and my business model over the years has been redirected towards Mr Penniston-Hill's business, Intelligent Money.
Julian Penniston-Hill was one of the executives who was responsible for the Willis Owen Isa guides which were enclosed within national newspapers and which also caused controversy in their day.
Brokers who have worked hard to persuade their clients to transfer all their various Peps and Isas into one of the fund supermarkets must now be spitting blood. What they have done is neatly packaged up their clients' investments to enable Penniston-Hill to steal them and rebate the renewal. If all these Peps and Isas had been separate, his accounting would have been horrific. He would have had the consolidation task.
Unfortunately, anyone who is directing their anger towards Penniston-Hill is misguided. Penniston-Hill looked at a marketplace and, like John Holder from Chelsea Financial Services did in the late 1980s, Hayden Green from the Pep Shop did in the 1990s and the Elsons from CommShare did in the late 1990s, perceived that there was money to be made.
The level of commission is greater than the amount of work and service that the broker provides to their clients. “That's rich coming from Hargreaves,” I will hear ringing out on when this article is read. However, it is absolutely true.
Put your hand up if you really do believe that you give good value for money for the renewal commission that you receive. Indeed, some of the above mentioned quite openly admit to no service for the renewal payment but are happy to discount initial charges in order to become the beneficiary of the renewal – a business model that is no different in its innovation than Julian Penniston-Hill's.
The crux of the problem is that the investment industry is probably the only industry where retailers are rewarded equally despite the effort and shelf space.
Penniston-Hill will get the same initial commission as the IFA who might drive 50 miles to see a client, produce a report and another 50 miles presenting it.
If there was no initial commission at all, Penniston-Hill would have nothing to rebate and he would have nothing to market his business with. The man driving the 50 miles twice and reporting would, in theory, charge a fee. Unfortunately, the investing public value our time lower than a plumber's.
The crux of the problem is the payment of equal remuneration for unequal effort. Penniston-Hill is doing absolutely nothing to expand the market or service the clients. He is honestly charging £35 to rebate the service charge without the service.
However, many brokers are giving exactly the same after-sales service as Penniston-Hill but are keeping the service charge – who is the rogue?
The solution lies with the payers of renewal. If you ain't doing the work you shouldn't get the pay. Thousands of people probably agree but how many brokers in the UK should be eligible to receive the service charge? Who is going to play God and decide who is worth the service charge? All together now -“I work hard for my service charge” – you will never go to heaven.
There is a real sting in the tail here because who gets how much commission is completely in the hands of the people that pay the commission. There is no regulatory problem here. Penniston-Hill is not offering to take calls from investors, he is not offering to give investment advice. In fact, he is offering nothing other than a financial deal.
Does this mean that all the groups that support his initiative are saying that if you have any queries about your investment, we will gladly take these calls and service you, just like the broker used to service you? We don't mind that we are paying Penniston-Hill a renewal for not doing that because we will do it anyway.
Alternatively, are they saying that they are quite happy to pay Julian Penniston the renewal but they do not care that the person who needs information on the investments goes back to the person who sold it them in the first place or an unsuspecting new broker, neither of whom is receiving the renewal?
Again I ask you who is the big bad wolf in this equation? Is it the very weak, indecisive, uncommercial payers of renewal?
Perhaps that is where you ought to direct your wrath but in the meantime I would not be collecting investors' money in nice, neat, easily stealable supermarket packages.