STING IN THE TRAIL
Do you pay trail commission to your Independent Financial Adviser? If you don’t know you are not alone. Research by YouGov showed that among those who have a personal pension fewer than half knew what it was and that they paid it. Other surveys have shown even less knowledge among investors and the general population.
Trail commission is normal on any pension or investment such as a unit trust, investment fund, a shares ISA or a regular premium policy. It is usually 0.5% of the total amount of your investment – though can be more. It doesn’t sound much – half a per cent of £1000 is only £5 a year. But that steady drip drip out of the bottom of your pension or investment pot does a lot of damage over the years. And if your adviser gets it then he or she should do something for it.
So if you have a pension or investment, find the original paperwork and check if trail is paid – it may be called something else but will be an ‘every year’ payment. If it is then contact the IFA who sold it to you and ask what they are doing to earn it – and more importantly what they will do in the future. It is possible your IFA has sold its clients to another IFA – in which case they will get the trail. If so, contact them.
If the answer is unsatisfactory you have two choices. You can change to an IFA who will offer advice and reviews for the trail commission. Normally if you appoint a new IFA then any trail commission on your investments is diverted to them. (If your IFA has gone out of business the trail will simply be kept by the investment company but can be reclaimed by a new IFA).
If you do not need continuing advice – or the amount is so small you would not get much anyway – then you can go to an IFA who gives no advice at all but is happy to rebate all or most of your trail commission to you.
There are a few companies that will do this for existing investments if you buy something or move your investments to them. But a new firm called Massow’s is dedicated to nothing else and does not touch your pension or investment.
A typical pension pot of £30,000 will generate trail commission of £150 a year. If that fund grows by 5% a year, over 10 years that could amount to more than £2400. Massow’s reimburses 80% of that commission keeping 20% to pay for the administrative costs. An alternative for units trusts – but not pensions – is Cavendish online which charges flat fees of £25 upfront and £10 a year.
More at www.paymemy.com/mission and you can read my interview with Ivan Massow
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