Consumers should be aware that if their adviser is proposing to charge trail commission
Good question. Furthermore, a simple calculation indicates that trail commission alone could mean that the intermediary makes twice as much from the ARF as the customer could expect to earn.What percentage of customers of investment intermediaries have ever heard of trail commission?
- without having to do a tap of work after the initial sale.
What does this mean? How can they show "what work they're doing"?The regulations are clear that if an intermediary chooses to take trail commission, they must be able to show what work they're doing in return for it.
I may be wrong I am sure I will be corrected if so they are covered once they contact you with updates several times a year by post,What does this mean? How can they show "what work they're doing"?
First of all, are we talking about CBI regulations? Could you quote chapter and verse for me, please?
Is it sufficient for them to say something on the lines of "I will check regularly that the funds in which my client's money is invested are performing as expected"? My fear, from what I've heard in the market, is that some intermediaries (hopefully very few) wait five years (or whatever is the time required to 'earn' the commission received at time of sale) and then advise the client to move to another company, giving the intermediary an opportunity to earn initial commission again - and more trail commission, of course, but only on condition that they keep to the law and demonstrate that they will keep an eye on things and be prepared to move the client after another few years, in order to earn even more commission.
Sorry, cynicism got the better of me.
Hopefully, you'll set me right and demonstrate that intermediaries really have onerous legal responsibilities and that they discharge those responsibilities in a professional manner.
Thanks @kinnjohn Given that no-one has corrected you, you seem to have got it right. Not a particularly demanding standard of care , is it?I may be wrong I am sure I will be corrected if so they are covered once they contact you with updates several times a year by post,
I think a paper trail is all they need,
It's not the ARF providers' role to police these regulations, nor to fix prices. They just provide the vehicle for collecting the trail commission and paying it to the broker.
So I'm told. I'm asking what that implies in practice. Is @kinnjohn right in saying that a paper trail is all that's needed?Does the broker not have ongoing obligations such as reassessing suitability regularly?
I hear you, but who decides that an intermediary is acting illegally? And how how do they make the decision? Do they have different criteria on what constitutes illegality for an intermediary taking 0.1% than for one taking 0.5% a year? Does the 0.5% intermediary have to send five times as many letters to the client, telling them how diligently they're looking after their interests?what you're talking about here is simply illegal.
The old "5&5". Get 5% commission, wait 5 years for the early exit penalties to be finished with and then move to another provider to get another 5%.What does this mean? How can they show "what work they're doing"?
First of all, are we talking about CBI regulations? Could you quote chapter and verse for me, please?
Is it sufficient for them to say something on the lines of "I will check regularly that the funds in which my client's money is invested are performing as expected"? My fear, from what I've heard in the market, is that some intermediaries (hopefully very few) wait five years (or whatever is the time required to 'earn' the commission received at time of sale) and then advise the client to move to another company, giving the intermediary an opportunity to earn initial commission again - and more trail commission, of course, but only on condition that they keep to the law and demonstrate that they will keep an eye on things and be prepared to move the client after another few years, in order to earn even more commission.
Sorry, cynicism got the better of me.
Hopefully, you'll set me right and demonstrate that intermediaries really have onerous legal responsibilities and that they discharge those responsibilities in a professional manner.
Let's develop that analogy. The customer is buying €100 of Chanel 5 perfume. The €100 is sent to Chanel. Chanel provide the customer of Browne Thomas with a bottle of 65ml and pay BT €35 commission. They provide the Dunnes Stores customer 90ml and pay DS €10 commission.If Brown Thomas sells a product for €100 and another shop sells the same product for €75, that's a matter for the sellers, not the manufacturers.
I don't sense an anti broker sentiment. Brokers are like many, they will try and get as much as they can from a sucker. I see OP as being very anti provider for facilitating this natural greed.There is a serious anti-broker sentiment here (and I’ve no axe to grind either way because I’m not a broker).
Let's develop that analogy. The customer is buying €100 of Chanel 5 perfume. The €100 is sent to Chanel. Chanel provide the customer of Browne Thomas with a bottle of 65ml and pay BT €35 commission. They provide the Dunnes Stores customer 90ml and pay DS €10 commission.
Chanel is clearly being very unfair to its customers, differentiating according as who sold the product.
The point of describing it this way is to highlight that the producer is facilitating the rip off.
Well we can play word games I suppose. The main difference is that commission actually detracts from the product. With Chanel perfume the customer gets the same product but to be sure some pay more than others for it.I think your analogy is wrong. Chanel calculate that they can make a profit on a single bottle as long as they sell it for €65. So they sell it at €65 wholesale price to all their stockists. BT sell it retail for €100. Fred's Discount Perfume Shop sells it online for €80. Is it Chanel's job to tell BT what price they should be charging for it?
Please don't get me wrong. I'm not an apologist for any unethical brokers out there, nor do I speak for brokers in general. I can only speak for myself. Are there brokers out there who are gouging their customers for maximum commission and providing a lousy service in return? Undoubtedly. There are good and bad brokers just like any other profession.
awaiting GG's source that this is not the case
AAM should campaign for people who have signed up to these OTT tail commissions to immediately cancel their commitment and instead seek advice maybe every 5 years, possibly on AAM.
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