If you took out investment products before 2013, you may be paying your financial adviser a commission. Find out how you can get some of it back.
What is trail commission?
When you bought a financial product before the beginning of 2013, you often paid an upfront commission and an ongoing (smaller) commission. This practice was banned at the start of 2013 but only for new products. Any existing financial proucts did not have to repay the trail commission automatically.
- Buying via a financial adviser. If you bought the investment or pension via a financial adviser and paid for their advice by commission, they received the upfront commission – and ongoing commission payments called ‘trail’ or ‘renewal’ commission. This was instead of you paying a fee for the financial advice.
- Buying direct If you bought direct – i.e. straight from the pension or investment company – the commission was often built into the product so you still ended up paying it (but the company kept it instead of passing it onto a financial adviser).
How you were told about commissions
If you were using a financial adviser before January 2013, he or she may have told you how much the commission would be before you took out the product. The rules were tightened up in January 2005, after when financial advisers have had to give consumers information about commission payments they received. If you have an investment policy that you’d taken out before then, you may not have been told about all the different charges and commission payments. T
SAVVY TIP: he problem is that the trail commission seem like much, but once it’s taken from your plan year after year it adds up. Once you take into account the effect of the lost interest on money that would otherwise have been invested, it adds up even more.
- Trail commission rates varied, but will typically be at least 0.5% of the amount you pay in.
Getting trail commission rebated on existing plans
The commission your financial adviser receives every year was designed to pay her or him for ongoing advice but many financial advisers don’t do anything for their money. However, you can’t simply ask for your adviser not to receive trail commission anymore, as finance companies won’t stop paying it.
- You can transfer your investments to an execution only broker. They will rebate some or all of the commission that would otherwise be paid to the financial adviser for the rest of the term.
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