Part of it said there would be no impact if the investor continued to invest directly rather than through an adviser. This reads that they will be better off if they do not use an adviser. It is all very negative about financial advisers.
The next paragraph just stirred up trouble asking investors to get in touch to see the history of all their previous commissions. The next paragraph encouraged the client to question the advice given by their adviser. The next one encouraged the investor to remove the adviser. It is a very slick piece of salesmanship designed to make the investor question the cost and purpose of using an IFA. What BNY does tell you is that it is BNY, not the client, who will keep the 0.5 per cent trail.
The representative said: “Why should the IFA keep the trail for doing nothing?”. I said: “Why should you keep it for doing nothing?” He said that is was part of the AMC anyway and I pointed out that AMCs increased from around 1 per cent to 1.5 per cent many years ago to allow for adviser commission and that if the client wanted the commission stripped out, then the AMC should be reduced to 1 per cent. The rep said the AMC was to administer the funds and I pointed out that they did it on 1 per cent anyway, so they would get the extra 0.5 per cent for doing nothing.
Most clients who feel their adviser is getting trail for doing nothing will gladly switch off this trail in the belief they will be better off financially by doing so. If they knew the fund manager would keep it instead they might not be quite so eager to become an execution-only client.
So my point is this: this is evidence that fund managers (I believe BNY gets 50 per cent of their business from advisers) are directly encouraging investors to get rid of their advisers to save commission, but they are silent on the fact that it is the fund manager not the client who will gain financially.
Dominic Browning
Principal
Browning Financial Planning, Torquay
