Money for nothing

The blog posts on websites read by UK independent financial advisers are alive with objections to comments by Andrew Fisher, outspoken chief executive of Towry Law.

Mr Fisher runs a fee-based advice outfit, but revealed recently that his firm gets £6m a year in trail commission on legacy business it inherited from firms it has taken over. Towry Law does not provide a service in return for this money – an example of how it is possible to earn money for nothing in the strange world of financial advice.

No doubt Towry Law is not alone in happily pocketing this cash. But Mr Fisher is under attack on the blogwaves mainly because of his oft-stated opposition to commission-based advice. His position  looks contradictory, to say the least, even if he is not actually providing advice in return for the commission received.

But at least he has got people talking about the iniquities of trail commission. How did the idea take hold that advisers should share in the investment growth of people’s savings in return for the occasional, even annual, review of their investments? They get that money whether their advice turns out to be good or bad, and their customers cannot deny them the money if they do not think they deserve it.

Then there are the execution-only brokers who earn trail commission – for what? If it is for administering the investment, there is a big question mark over whether 0.5 per cent a year is a justifiable charge. If it is for making the sale, surely the reward should be capped at some point, not open-ended.

Finally, there are the fund managers that charge direct customers the same as advised customers and fail to rebate either initial or trail commission. Does it cost that much to service these clients or are the fund managers having a laugh?

Not much will change under the Financial Services Association’s retail distribution review. Trail commission will become an adviser charge administered by the provider. That won’ t necessarily make it more justifiable. Is this what the FSA means by treating customers fairly?

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.


Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.

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