Financial Brokers article - 3.5-5% initial commission.

[Fortune]

I've not seen 5% initial on an investment

Someone told me recently Aviva were doing this (possibly going as far as 6%, I may be misremembering that bit).

 

[Setforlife]

When you asked your advisor about this, were they not able ((unwilling?) to explain how it works to you?

I've not seen 5% initial on an investment but it might be something new that a broker that's on the acquisition trail might have negotiated with a product provider on the promise of a volume of business. In the context of what the article is about, that might add up. Those purchase costs have to be recovered somehow.

No way are you getting hit with a 5% contribution charge of a €2m fund that's split into 4 PRSAs. I doubt you'd even have to worry about a CoBC charge (if it still exists when you come around to doing this).

Well I only currently have a smallish life investment fund via this advisor, which I am clear on charges, minimum investment period, taxes etc are. On the future in fairness it was easy to fob me off on potential further costs and charges as it’s 7-10 years away and who knows that the available options will be, what the charges on offer may be, how much is in the pension etc etc. I did hear some worrying noises about watching out for low cost options with poor service etc, and it was a good reminder that an advisor is running a business too and to keep that in mind for the future.

I am aware that you would not expect to pay a large % of a large fund but as you say costs are on the rise and it seems ‘independent’ advisors are disappearing slowly but surely and a decent advisor is worth a large amount of money to a lot of people I guess.

 

[S class]

Back in the dark ages (2003) I made the mistake of doing business directly with Eagle Star. I opened my AVC PRSA at 95% allocation rate.

A few years later having started to read posts on AAM I transferred to a broker at 97% allocation rate.

Then a short time later I discovered another broker on AAM offering 98% allocation rate. Second switch.

Short time later I noticed an execution only broker offering 100% allocation rate. Third switch.

Lesson 1.
Don't assume that buying direct from the provider company will be the best deal.

Lesson 2.
Do some research (this site is a great research tool) and you can save tens of thousands of euro on your pensions.

As regards trusting a broker.
All contributions to PRSAs are paid directly to the provider company. The broker never has access to your contributions.

 

[Setforlife]

As regards trusting a broker.
All contributions to PRSAs are paid directly to the provider company. The broker never has access to your contributions.

Personally when I say trust an advisor, I mean trust that they have your interests at heart, not their interests. Eg advising you to put your money into arena capital or solar 21, because the companies paid big finders fees to advisors to get them to advise you to do so. Your money was actually with the companies but you still lost it. Or at a lower level advising you to buy an Aviva fund because they are getting 5% off the top, even if they actually think it’s the best investment. You could call it a win/win but you would like to have seen advice on an option and a mechanism to say put money in a correctly domiciled etf to pay cgt only.

Presumably some advisors would say possibly correctly that is complex and then you would have to pay them what they lose out from Aviva on perhaps.

 

[Marc]

It’s ironic that I’m required by the central bank to maintain professional indemnity insurance and I have the statutory cover in place for both investment intermediary activities under the IIA 1995 and also insurance intermediation.

But I also have the same cover in place for all other business activities. This means that if I had sold solar 21 and arena loan notes by the shed load my clients would have been covered on my PI policy.

I suspect the only reason I have that cover in the first place is that I haven’t had a complaint or made a claim in 17 years.

And therein lies the rub. If you want to engage a reputable adviser in a well run business with appropriate governance and protections in place, it’s going to cost you more than the cheapest broker in the market. I would have thought that this was axiomatic

 

[Protocol]

Lesson 1.
Don't assume that buying direct from the provider company will be the best deal.

+100%.

Maybe 20-25 years I went direct to a Hibernian Insurance branch to start an RAC pension, thinking I was cutting out the broker middleman.

I subsequently discovered, probably thanks to this website, that I was being charged 8% hidden commission on every contribution, and an annual fixed fee of £150 / €190.46.

 

[Fortune]

it’s going to cost you more than the cheapest broker in the market. I would have thought that this was axiomatic

The problem is that there are plenty of brokers that are only as good as the cheapest broker but who charge like the best. The average punter can find it difficult to figure out which is which.

 

[Setforlife]

+100%.

Maybe 20-25 years I went direct to a Hibernian Insurance branch to start an RAC pension, thinking I was cutting out the broker middleman.

I subsequently discovered, probably thanks to this website, that I was being charged 8% hidden commission on every contribution, and an annual fixed fee of £150 / €190.46.

It’s a very good point and once you find out that say Aviva may give 5/6% off the top back to a broker, then going direct (if you could) would in theory be making them an extra 5% and I wonder if you do get it back on yearly charges as mentioned above, I don’t believe so.

Really you would want access to a broker to get this deal but share in the bonanza, not find yourself with early redemption penalties because the broker got the great deal.

 

[Setforlife]

It’s ironic that I’m required by the central bank to maintain professional indemnity insurance and I have the statutory cover in place for both investment intermediary activities under the IIA 1995 and also insurance intermediation.

But I also have the same cover in place for all other business activities. This means that if I had sold solar 21 and arena loan notes by the shed load my clients would have been covered on my PI policy.

I suspect the only reason I have that cover in the first place is that I haven’t had a complaint or made a claim in 17 years.

And therein lies the rub. If you want to engage a reputable adviser in a well run business with appropriate governance and protections in place, it’s going to cost you more than the cheapest broker in the market. I would have thought that this was axiomatic

Not sure it’s unquestionable Marc and I don’t see any irony either? The assumption for consumers is that regulated advisors all have the appropriate governance and protections in places, isn’t that what regulation is supposed to be for? How else would consumers find such a person? It’s difficult to even rely on word of mouth, as even advisors in the business a long time here have advised a great deal of people through very good times and very few through very bad times or actually through a long retirement.

 

[GSheehy]

Wow, I hadn’t pictured that merger/takeover.

Why?

I did hear some worrying noises about watching out for low cost options with poor service etc

Where? Can you be a bit more specific? Because that sounds like something someone who was trying to sell you something would say about a fairly priced product that you were thinking about buying. If it's the broker/website I think you're referring to, start a new thread with a linnk to it and the regular (non-industry) posters here will be well able to cut the 'noise' to shreds. The content is mainly waffle and not true.

The average punter can find it difficult to figure out which is which.

The market for PI is limited here and Central Bank tell you what minimum level of cover you have to have. A Regulated entity can't operate without it. A general information document on PI is attached. If you chose to have additional cover for other non-standard/funny/dodgy products or services then I presume you could apply for and buy that, if you can find a provider.

The main reasons why a broker would pay more for their PI is that i) their commission/fee income is multiples of (say) a low cost/low margin/execution only intermediary, ii) they want to advise folk on non-standard products/services, iii) claims history or, iv) there were a lot of claims on the PI scheme from a few brokers and the insurer is now trying to socialize and recouperate the claims. So, if the activity/product of (say) Arena was covered, every other broker would end up 'paying' for it. And, the consumer, eventually, though higher costs from the advisor.

Personally, I'd only need a policy that covers products / activities regulated by the Central Bank of Ireland, The Pensions Authority and Revenue, only. And before you ask, there is no question on the proposal form about what percentage of your business is advisory or execution only. The insurers don't make that disctiction and give you a discount because there's no advice. The policy cover is as if all customers are advised customers and that's fair enough.

Bottom line, BIG fees/commissions = BIG premium.

But, we're way off topic here again. Can you go back to discussing the implication for the consumer on all these buy-outs. The impact of a reducing number of intermediaries, higher initial commission (which has to be recouperated by prodict providers by higher base AMCs?), increasing AMCs (and trail?) on purchased books of business (to recouperate costs of purchase faster) and why buyers/investors from other jurisdictions are intetested.? I saw nothing of comfort in the article for the consumer to say that lower costs would come witth economies of scale.

At some stage I'm going to have to consider an exit (I'm of the age) and I'm interested in what you savvy consumers think about the way the market is gone/going.

 

[Setforlife]

Where? Can you be a bit more specific? Because that sounds like something someone who was trying to sell you something would say about a fairly priced product that you were thinking about buying. If it's the broker/website I think you're referring to, start a new thread with a linnk to it and the regular (non-industry) posters here will be well able to cut the 'noise' to shreds. The content is mainly waffle and not true.

I heard it from the advisor, which I thought was clear and I agree totally with what you are saying, which is why I described it as ‘worrying noises’ and why I feel I will get at least one extra piece of independent advice when the time comes.

As the the why I hadn’t pictured that merger, because to me Marc and John from everlake appeared properly independent and often going against average approach from advisors. AskPaul appeared to be a consumer, volume give everyone the same advice business. I can see how it makes business growth sense for askpaul and fairstone but not how it makes sense for everlake brand. (Except from the obvious selling your business sense of course, which I know of course is the end goal of most business owners)