# Commission Paid



## greeneman (1 May 2009)

When I transferred my DC fund to a Buy out bond the employers pension advisor received a 2.5% commission (10K) and I got a .5% reduction in allocation. Neither employer or I were aware of this until I queried my lower allocation recently.

Advisor was paid a fee to wind up the pension scheme.

Is this normal ? 

Greeneman


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## Protocol (1 May 2009)

Yet more evidence of the massive fees and charges in the pensions industry.

That transaction should cost 100-200 euro.

Fees and charges can be very hidden in occupational DC schemes.


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## LDFerguson (1 May 2009)

Protocol said:


> That transaction should cost 100-200 euro.


 
Agree that hiding commissions etc., is bad practice but how do you arrive at this figure?


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## Protocol (2 May 2009)

I don't know as much as you about it, but it couldn't take more than 2-3-4 hrs work????

So I roughly guessed 100-200 euro?


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## LDFerguson (5 May 2009)

Okay - thanks for clarifying.  For a typical Buy Out Bond transaction where the scheme trustees co-operate, I'd say your estimate of time would be about right.  

Suggesting that everything should be costed on a fixed fee basis rather than percentages is a much bigger debate which would involve brokers, solicitors, estate agents etc.  Personally I have no issue with either fixed fee charging or percentages as long as the customer is advised before point of sale, which evidently didn't happen here.


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## Protocol (5 May 2009)

The pension advisor got *10,000 euro* for this transaction.

They earned 10,000 euro to transfer an employee's 400,000 share of their employer's DC pension fund to the employee's own personal Buy-Out bond.

This work may have taken between 2-10 hrs, involving several telephone calls?, letters?, maybe some cheques? (I doubt it), etc.

*A €10,000 fee.*

*The more I think about it, the more shocked I am.*

This puts the medical consultants, solictors and barristers way down the league table for overcharging.

If it was on percentage, 0.1% would be an ok fee.


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## LDFerguson (6 May 2009)

Not disputing the figures.  My point is that I don't believe costs for any service in a free and competitive market should be prescribed at a flat rate.  And commission / fee disclosure before point of sale should be mandatory in all financial service transactions.    

For example, in my opinion, what should have happened in this transaction - the broker should have advised the client prior to point of sale that his/her commission would be 2% i.e. €10,000, thus giving the client the opportunity to either decide that this was a reasonable cost for the transaction, or (more likely) to shop around to get a better deal, which s/he would have easily got.  

_P.S. - The above is my opinion only.  I'm not suggesting any impropriety on the part of the broker in question.  The broker acted fully within the law as it stands, based on the details provided in the original post.  _


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## Protocol (6 May 2009)

I too am not in any way suggesting impropriety. It seems to be all legal.

But the €10,000 fee is still shocking.


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## NorthDrum (6 May 2009)

The OP said the broker got 2.5% allocation, but they only lost .5% allocation.

Just curious, had they gotten 100% allocation, would they of cared what comission the broker got. (ie technically if it didnt cost them anything).

There is still alot of debates around Financial Advisors and comissions that need to be clarified. Theres alot of confusion and distrust from clients.

I agree with LDferg, the fee should be agreed at the beginning for transparency. 

The cost (per hour) of a professional in this industrys can be from €150 to €800 (ever popular Eddie Hobbs milking his stardom). 

I agree with Protocol that €10,000 looks alot of money to get for this transaction, but if the client actually paid €2,000 (out of their allocation) would that be acceptable (and the broker hadnt received the €8,000). What I am getting at is, is it the amount the broker received, or the amount that the client technically paid (.5% comission) thats the issue.

Remember if you go into an Insurance company off the street, seldom (if ever) will they undercut a broker (the people who bring them a majority of business). In this example the client paid a broker €2000 to move their scheme, if the broker did 10 hours work then technically what is the problem. It would of made more sense and reasonable for the broker to of given the client 100% allocation and take the 7.5% themselves, but would there of been an issue with the money the Insurance Company paid them?

_Im only going on whats been said here so do not know any other circumstances that may of happened in the course of this transaction. This is my view , based on limited information provided . I dont know what reasons the broker had for advising and doing what they did, I am only commenting on what I feel to be fair . ._


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## greeneman (6 May 2009)

Thanks for your comments.

Note: The DC fund manager paid the commission of 2.5% to the advisor. They were managing the DC fund and now they manage the buy out bond. Apparently, a commission was paid because it is a new policy. They say 2% is the normal fee but in my case they agreed 2.5% with the advisor. That is why I did not get the normal allocation of 106% - just 105.5%. This happened 2 years ago but I only found out recently when I queried the lower allocation of 105.5 and why I did not have 106% per the literature. 

Our arrangement with the advisor over the years was fee based. They then got an additional fee to close up the fund. All participants went into buy out bonds. The €10K commission only refers to my portion.

My potential complaint is twofold:

1: There was zero transparency. I and my employer would like to have known about the commissions. We would have requested a share. After all we generated the business. Employer no longer in existence.

2: I suffered a lower allocation so that the advisor increases his commission from the fund manager. The reduced value at the time was equal to €2K.

Where should I go from here ?


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## Protocol (6 May 2009)

Let me get this straight:

You had a 400k DC pension fund with a life co, which was transferred to a Buy-Out bond with the same life co.

They gave 106% allocation into the Buy-out bond, so that means 424k going into the Buy-Out bond.

So you are up 24k????

They then paid the broker 2.5% or 10,000 to arrange this, as against the normal 2% or 8,000.  But because they paid the extra 2,000 fees to the broker, then then reduced your new fund to 222k?

You are up 22k.

The broker earned 10k.

The life co spent 32k.


There must be some catch here??? A bid-offer spread??

*Why would the life co be willing to spend 5.5 + 2.5 = 8% to get existing business into a new policy? *

*Also, why is the broker needed when the trustees could have arranged things direct with the life co??*


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## NorthDrum (8 May 2009)

As a referenace I looked into this.

108% allocation is not unusual for this amount of money, however there really had to of been a 5% bid offer spread (like Protocol suggested).

In the OP's case, this would mean that 100.5% was allocated or invested - (roughly 445k) and 2.5% would of gone to comissions to the broker. This is the only rational explanation of these figures. 

The fact that the Financial advisor got a fee seems excessive in that they also took some serious comission on top of it without disclosing it to the client.

Since the broker is not in business anymore I would approach the Insurance company with your complaint and see if you can get any joy from them (though I doubt it). Write in a letter of complaint to them explaining how upset you are with your lower allocation. You could always threaten to move the business if they dont top up your policy by .5%.

One way of getting some sort of closure would be by finding out how much it would cost to transfer the bond to a differant company (as in would you pay a get out penalty clause). If the case is that you would get 100% of the value, contact a broker you trust, agree a fair fee for moving and get your allocation. so for example say to a broker, if they can get you 108% allocation (with 5% bid offer spread), say to them something like you will give them 1% and you can take 2% getting a 102% allocation on your existing investment. Ok the other broker gets away with what he did but at least you get a good allocation. . 

Alternatively you can Contact the FO and see if there is anything that can be done.

[broken link removed]

 Im not really that sure to be honest as you say the company is now out of business. They may have to continue paying for Professional Indemnity for a certain amount of years after closing up (they may of sold their business to another company that may have take on their liabilities, but I wouldnt bet on that). Just fill out a FO form or give them a quick bell to see if you have any avenues to explore.


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## Protocol (8 May 2009)

Where do you see that the broker is gone out of business?

Is it not the employer that is gone?


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## NorthDrum (8 May 2009)

Protocol said:


> Where do you see that the broker is gone out of business?
> 
> Is it not the employer that is gone?


 

Ah sorry about that , good spot, my mistake . . 

Firstly, contact the advisor in question (by letter, registered post). Make a complaint about what you have said here and outline what you would like to be done (returned allocation etc). The broker is bound by law to reply to your complaint. 

If you do not hear from or get a satisfying response then you could send your complaint to the Insurance comapany.

After that contact the financial ombudsman.

The thing is that really there should of been more transparency in this case, but technically (I say this loosely) the broker did not do anything illegal. Brokers can choose to give more or less comission to the clients. It is poor practise not to disclose the comission they received (particularly after you already paid them a seperate fee).

Hope this helps in some way, *whatever you do, try to resolve it with the advisor first* . If you havent even tried to get some Joy from the Advisor the Ombudsman will tell you to go there first. . Keep documents of any correspondence.


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## vanesssa99 (13 May 2009)

I don't know as much as you about it, can you give me more information?

commission  de surendettement​


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