2. My published reply to Neil Liversidge to his letter
of complaint
following Money Box on Saturday 10 September 2011.
Dear Neil
Thank you for your long and
detailed comments on the item on Money Box about trail commission and on other
matters.
You objected to the phrase
‘one of the industry’s best kept secrets’ to describe trail commission.
Let me refer you to the 15th
report of the Treasury Select Committee published by Parliament on 6 July 2011.
This link takes you to section 3 on commission
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtreasy/857/85706.htm.
If you scroll down to paragraph 46 in particular you will see that the committee
heard that under half of recent personal pension purchasers knew if their
adviser took trail commission “only 46% are aware of whether their adviser
received trail commission”. GfK research for the Financial Services Consumer
Panel found that “while most consumers were aware that financial advisers were
paid by way of commission from providers, the majority were unaware of the
existence of trail commission at all.” Under the FSA disclosure rules of course
100% should be aware of it and what it is for.
As you know, the Financial
Services Authority is so concerned about trail commission being charged when no
service is given that it is banning it altogether for new contracts from 1
January 2013. It will also insist that any [fresh]* IFA who receives trail
commission from that date under an older contract earns it by providing a
service. The Financial Services Authority would not be taking such action if
there was not a problem with the service being provided by a significant number
of IFAs.
My own discussions indicate
that very few people who are not involved in financial services as journalists
or in other ways have heard of trail commission. Indeed, when I have talked to
people in the last few weeks about Massow’s venture the first reaction from
almost all is ‘what is trail commission?’ followed by a certain incredulity when
I explain.
Of course in the pages of
documentation the percentage amounts are there. But they are easily overlooked
and the figures above speak for themselves.
You make the point that you
are quite open and upfront about trail commission and do a lot of work for it. I
have no reason to doubt that is true. Many IFAs are like you in that respect
which is why I asked Ivan Massow:
“But there are good IFAs,
aren’t there, and there’s a growing number of good IFAs who offer continuing
advice for this money? Why should you be trying to take their business off
them?”
I challenged Massow in other
ways, reminding people for example that a previous business of his had, after he
had sold it, gone out of business and asked:
“What will people do if this
one doesn’t work as you hope it would? Will they lose anything?”
But I must remind you this was
not me debating with Ivan Massow. I was asking questions, partly based on emails
and tweets I had received. That is my job. The person invited on the programme
to put the other point of view was Brian Dennehy, a Director of the IFA firm
Dennehy Weller.
I really do recommend that you
listen again to the item on our website
http://www.bbc.co.uk/podcasts/series/moneybox
or read a transcript of it
http://news.bbc.co.uk/1/shared/spl/hi/programmes/money_box/transcripts/money_box_10_sept_11.pdf.
Now that I have done so I am happy that, in the six minutes we gave the item, it
was a balanced presentation of Massow’s idea challenged by both me and Brian
Dennehy.
I am sure you would agree that
there are IFAs receiving trail commission for which little or no work is done,
some on contracts that date back many years. As the Select Committee concluded
“Trail commission where advice is not offered is very difficult to justify.” (para
49). I am sure you would agree with that statement.
So I do not believe that to
call trail commission a ‘secret’ slanders the industry at all. It just describes
the current position of the industry as a whole.
Let me deal briefly with your
other points which, as far as I can see, are not related to this Saturday’s
Money Box. You suggest that I and the programme try to ‘engender mistrust’ of
the financial services industry. That is simply not true. Of course we encourage
anyone who is seeking financial advice to approach the meeting with a healthy
scepticism. I am sure you would agree with that. At Money Box and through my
twitter account I get enough examples of bad financial advice to make me sure
that is the right approach.
We also encourage everyone who
needs financial advice to find a good independent financial adviser – that
phrase appears on Money Box and Money Box Live many times in the course of the
year.
How you can think I recommend
people get ‘something for nothing’ entirely baffles me. I have advocated paying
for advice upfront for many years. That is not something for nothing. It is
something for something.
Two minor points in your
email.
I do not purport to be a
‘consumer champion’. I am a consumer journalist, so I do see things from a
consumer rather than an industry point of view.
You refer back to the collapse
of Northern Rock. If you check the transcripts you will find Money Box took a
very different line from the one you recall. On the programme on 23 February
2008 we discussed putting savings into Northern Rock for precisely the reasons
you give – see
http://news.bbc.co.uk/1/hi/programmes/moneybox/7258552.stm.
And when the queues were round the block some months earlier our programme of 15
September 2007 clearly said at one point that those savers were not behaving
rationally. Again the transcript is available via this page
http://news.bbc.co.uk/1/hi/programmes/moneybox/6993488.stm.
As for your offer of a debate
we had a debate on Ivan Massow’s new business on Saturday between him and Brian
Dennehy. I do not debate on the programme. That is not my job. I put tough
questions to people on all sides of the argument – that is my job. A broader and
perhaps more interesting idea in the run up to 1 January 2013 is a debate
between opposing sides on financial advice and remuneration. If we staged that
then I would be putting tough questions to both sides. There are, as you know,
strong arguments for and against the end of commission.
Meanwhile, I see no reason to
apologise and no record to set straight. Your single complaint about Saturday’s
programme is the phrase ‘one of the industry’s best kept secrets’. For the
reasons set out above I believe that description of trail commission to be true
and justifiable.
If you wish to pursue a formal
complaint through the BBC then you can of course do so.
best wishes
Paul