Former IFA Ivan Massow has warned that IFAs receiving trail commission without giving ongoing advice could be as big a scandal as payment protection insurance mis-selling, as he prepares to act on behalf of a client in a potential ‘test case’ against Barclays Wealth.
Mr Massow’s new firm, Payme.com, which focuses on reclaiming trail commission for investors, is set to act on behalf of a Leicestershire-based investor who claimed to have paid almost £10,000 in trail commission to Barclays Wealth without any form of ongoing advice service.
In an interview with FTAdviser, Mr Massow who says he is prepared to fund the claim on behalf of the investor, warned the case could potentially be “massive” for the wider industry.
He said: “This could potentially be a thorn in the industry’s side. We are really in unchartered waters.”
The investor, Richard Muston, has paid £9,800 in total commission from his £200,000 investment into an Aviva fund managed by Barclays Wealth.
A spokesperson for Barclays said the fee comprises of the investor paying £5,000 at the point of sale in 2004 and an ongoing management charge of 0.5 per cent. The investment has risen in value over the seven-year period to just under £300,000, the firm added.
The spokesperson also pointed out the investor did receive advice at least once during this period. However, Mr Massow claims “there has been no contact” between the IFA and the client.
Mr Massow said: “This is definitely a bit of a problem and I think that Barclays will choose to settle out of court to avoid this being a test case.
“If it goes to court and the court finds in the investor’s favour, this could get out of control. This is dangerous and could be as large as the PPI scandal. In my opinion, it is very unlikely that they would find in favour of the IFA.”
A spokesperson for Barclays Wealth said: “In line with industry practice at the time of the sale, Barclays received an upfront fee for advice and trail commission of 0.5 per cent per annum from Aviva for the sale of this product, deducted by Aviva from the fund.
“Mr Muston was fully aware of this arrangement and he signed a document to that effect which clearly laid out the guidance on trail commission.
“Again, as per industry practice, the trail commission was not for advice, though by the nature of his relationship with Barclays, Mr Muston was entitled to advice as a matter of course.”