# commissions for pension advisers



## Chips (16 Nov 2012)

How can financial advisers be impartial if they are incentivised to get you to transfer to particular funds through commission arrangements with the pension companies? Is there any way to ensure the consumer/client gets the benefit of the commission, rather than the adviser? I have heard of advisers taking reduced commission, on the basis that they "negotiate" enhanced transfer rates (i.e. greater than 100%) for their clients. To be honest, I wonder if there are strings attached to these enhanced transfer rates that clients need to be aware of. Can anyone throw any light on this?


----------



## Marc (16 Nov 2012)

Good question 

The first point is to insist on a clean zero commission contract and pay a fee for advice instead.

However be warned, you are right to be wary since enhanced initial allocations still come with strings attached ie higher annual management costs AND early surrender penalties typically locking you in for 5 years.

You are correct in your assessment commissions are an inducement to sell products and therefore by definition the impartiality of the advice process is compromised.

My clients only invest in funds and products that do not pay commissions and therefore have lower fees. But because these funds cannot pay commissions, they do not feature on the radar of most advisers despite the fact that if they are an authorised adviser they are required by the central bank to conduct a "fair analysis" of the market. Some of the main low cost fund management groups in the world base their European operations in Dublin yet few Irish investors have ever even heard of I shares or Vanguard or Dimensional. Why? They don't pay commissions to intermediaries. In the main that is all many advisers are really doing - intermediation. Most advisers are even happy to be described as "brokers".

In my opinion by restricting recommendations mainly to products which can pay commissions, even if they take a reduced or even nil commission, the adviser is failing in their primary duty to their clients which as you correctly point out is to be impartial.

Equally, many if not most advisers still sell products based on past performance despite two clear facts

1) The Central Bank of Ireland requires a form of warning to the effect that past performance is no guarantee of future returns 
2) the only proven predictor of how well a fund should perform relative to its peers is the cost. Higher charges equals greater probability the fund will stink

http://www.sensibleinvesting.tv/Default.aspx


----------



## Sumatra (16 Nov 2012)

How can any advisor fee or commission based be free from preconceived opinions, favouritism, self-interest, bias or even deception?


----------



## Marc (17 Nov 2012)

Excellent question Sumatra.

This speaks of matters of Ethics and Professional integrity.

Why do I expect my doctor not to make a prescription for a drug from which she gets a "kick back" from the pharmacy? Professional ethics

So one way to establish if your adviser is a salesperson or a Professional is to ask to see their code of ethics and professional responsibility 



If they don't have one protect your wallet.


----------



## Sumatra (17 Nov 2012)

If your Doctor has already made up his/her mind on a prescription before he or she even sees you the patient then you'd need to protect more than just the loose change in your wallet wouldn't you?


----------



## Greco (29 Dec 2012)

Most Irish pensions are taken out in the weeks leading up to the tax deadline and as someone who has worked in the business here and abroad let me tell you that very few Irish people even ask about commissions charges fees or penalties and even fewer ask for these details in writing - I would suggest that detailed research is done in to all of these issues before investing - I believe that the use of commission agents in the pensions business should be stopped by the Central Bank as it discourages the giving of upfront answers to all of these questions


----------

