Investment intermediary not giving information on charges

A friend who is self employed put some money with an advisor over the last couple of years in the form of a lump sum and also monthly contributions.

He gets updates from time to time by email (from the broker, not from the company eg. Zurich).

I had a conversation with him some months ago and I was asking what charges were involved and when he went to check he felt the advisor was pretty coy about providing this info. I asked if he had paid a fixed sum for independent advice eg. a few hundred € but he said this was not the case as he was introduced by a few to the broker.

Recently the broker has indicated that there is a 1% charge on the fund management but my buddy has no idea what if any charges come out of his monthly payments.

In summary I was hoping to get some guidance on the following:

• Does the investment company eg. Hibernian / Zurich or whoever not have an obligation to provide formal statements once a year (or more frequently)?
• Apart from mentioning a 1% fund mgt charge, is there a mechanism for finding out what commissions (if any) are being paid to the broker?
• If my friend decides to moves there investment - would there be exit charges (from the fund manager and the broker)?
• Are there are specific questions he should be asking of the broker or fund manager to help get more transparency on the range of investments?

Any help would be very much appreciated as my fried is now 62 and the next few years are really important to his retirement planning,

Roy

I would be much more concerned about if the money is there. What independent evidence has he from the fm?

ircoha said:

I would be much more concerned about if the money is there. What independent evidence has he from the fm?

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Ouch, I don't think either of us even thought along those lines Ircoha - I'll mention that to him first thing on Monday

onekeano said:

In summary I was hoping to get some guidance on the following:

• Does the investment company eg. Hibernian / Zurich or whoever not have an obligation to provide formal statements once a year (or more frequently)?
• Apart from mentioning a 1% fund mgt charge, is there a mechanism for finding out what commissions (if any) are being paid to the broker?
• If my friend decides to moves there investment - would there be exit charges (from the fund manager and the broker)?
• Are there are specific questions he should be asking of the broker or fund manager to help get more transparency on the range of investments?

Any help would be very much appreciated as my fried is now 62 and the next few years are really important to his retirement planning,

Roy

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The Central Bank's Consumer Protection Code http://www.centralbank.ie/regulation/processes/consumer-protection-code/Documents/Consumer%20Protection%20Code%202012.pdf provides that a regulated entity must annually provide a statement that includes inter alia the sum invested; the number of units held; all charges and deductions and a statement of the value of the investment. Your friend should read the code (basically section 6) ; see what information he should receive and write to his broker asking why it has not been provided. Note information must be provided in the manner specified by the Central Bank. It wouldn't hurt to write directly to the investment company asking why he has not received annual statements. He does have the original documentation, reference no's etc.?

Thank you PMU for the advice - it's much appreciated and I will share with my friend on Monday, I looking at the Central Bank document and it appears 6.16 would apply to my friend



I'm pretty certain he hasn't received at least some of the above but at the back of my mind the niggling (and I hope over pessimistic) questions are: a) how would he know if his broker is regulated? and b) if the broker is not regulated then presumably none of the above apply to him?

Roy

onekeano said:

b) if the broker is not regulated then presumably none of the above apply to him?

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If the broker is not regulated, it's a criminal offence to be offering investment advice.

But that would be the least of your friend's worries. His main concern is whether this broker has invested the money at all. Did your friend get a policy document directly from Zurich? Can he ring them to confirm that he has actually invested with them?

onekeano said:

I'm pretty certain he hasn't received at least some of the above but at the back of my mind the niggling (and I hope over pessimistic) questions are: a) how would he know if his broker is regulated? and b) if the broker is not regulated then presumably none of the above apply to him?

Roy

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Again the Central Bank should be your first port of call: [broken link removed]

But, as BB says, your friend should first confirm what documents he received from the investment company.

There should be a policy document with a policy number and it should be possible to call the life company and verify what's there.

At a minimum, your friend would have received a policy quotation with his documentation. The charges are disclosed in that.

I find it is best practice, to disclose all charges in the Reasons Why documentation, which the client has to sign before proceeding with the policy. Most good advisors do that.

There will be a management fee for both the lump sum and monthly contribution policies that your friend has. This covers the cost of running the insurance company, broker fees and profit.

There are most probably early exit penalties that will apply for the first 5 years. This is to protect the insurance company. They are paying a broker a commission or giving a client a higher allocation rate (they pay more money into the policy than you are actually giving them). To stop them being at a loss from people just transferring their money around the various insurers, they have a condition that if they pay commissions fees or bonus allocations, you must keep your money there for 5 years so they can recoup these costs. I don't think it's unreasonable.

The insurer does have an obligation to send out annual statements to the client. These are all done automatically these days, so if he hasn't received anything, he should ring them up directly himself and ask for a statement to be sent out.

If they don't have any record of him, worry.


Steven
www.bluewaterfp.ie

onekeano.

Regulations and being Regulated are fine before an event , however in this case we are looking @ afters and that is a poor mans place!.

Suggest your friend approaches {advisor} and says he needs say 80% of the funds to buy (something) etc.
If advisor gives him good written 3rd party reasons eg as per Steven, that maybe your funds are locked up , you can quietly review his documentation.
If funds are forthcoming then he is probably ok ,and at least has 80% back !

He can then ask for the other 20% back.

In future only deal with properly regulated people who have appropriate insurances/skills.