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Integrity offered advisers up to 14% commission
by Nicholas Paler on May 06, 2010 at 15:44
Integrity Financial Solutions offered IFAs who invested clients into its traded endowment policy (TEP) suite of products huge initial commissions.
A presentation from the firm - which went into liquidation last year - shows Integrity offered up to 14% initial commission to advisers who recommended its products, with renewal commission on top.
One of the firm's 'Packaged Solutions', the 1st Time Buyer Plan, proposed to pay advisers £7,197 if they introduced £50,000. Others including its Property Income Plan, promised to pay a recommending adviser around 13% or £19,402 for investing £150,000 of a clients assets.
In the slideshow Integrity showed to advisers, the lowest paying product in terms of remuneration was the Bond Maximiser, which paid around 8% in initial commission to advisers.
Integrity said that commissions were calculated based on the exposure to TEPs rather than the initial client investment amount. The gearing employed by the products meant that the exposure to TEPs would be higher than the initial investment. It added that initial commission was limited to a maximum of 5% of the TEP exposure.
'If requested, 3% was the standard commission level paid to the Adviser out of the proceeds of the TEP Sale Transaction,' it said. 'If the adviser wanted to increase this and take 5% commission, the additional 2% commission would be paid from the client’s loan account to the adviser.It is important to note that if 5% commission was required, the additional 2% was factored within the loan calculations when the portfolio was built and detailed clearly on the cash flow supplied to the lender'.
Iain Stamp - the former boss of Integrity who currently runs sister company UK Integrity Group - said recently that he would not take responsibility for complaints about geared traded endowment policies sold by his former firm.
Speaking to the BBC's Moneybox programme about an investor who claimed they faced losing their home having invested in an Integrity product, Stamp said: 'We have great empathy with anybody who [invested]...[but] we cannot take responsibility [for investors losing their homes].'
'I wasn't involved in the recommendation, I believe her IFA recommended the plan to her.'
As well as heading up UK Integrity Group, Stamp is in charge of Innovative Financial Designs (InnovativeFD).
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4 comments so far. Why not have your say?
John Borgars
May 06, 2010 at 17:19
14% commission?
A product regulated by the FSA?
So-called Integrity expected to make a profit that more than covered its expenses after paying 14% of the investment to IFAs and have the rump of the investment generate enough return to more than cover return of capital and mortgage interest on the clients' borrowings?
If a TEP has an average life of 5 years to maturity or death (whichever is the earlier) the return would need to that means the *after-tax* return needs to be 12% pa compound for the client just to break-even. To get a 5% pa (3% after tax) return for the client would need an *after-tax* return on the TEP of more than 16% pa compound. If those returns were available they'd be snapped up by a proprietary trading desk in a bank that could finance it borrowing money at LIBOR + 0.5%
May I suggest that anyone who took a 14% commission should be personally (and I mean personally - no hiding behind declaring the firm insolvent) responsible for the losses suffered by his/her clients
Iain Stamp and whoever designed the plan should equally be held responsible for all the losses unless they can convince a judge that they were clinically insane when they designed the plan.
report thisnigel notley
May 06, 2010 at 17:46
Well said, John but there is an argument for chopping off their heads and impaling them on spikes at the entrance to the City of London with an appropriate FSA warning
report thisB. Murphy
May 09, 2010 at 15:57
Well if Borgars is right on the maths perhaps Ian Stamp should employ him.
There are plenty of safeguards to ensure IFAs are aware of risk in relation to clients and few ifas would risk their business on mis-selling.
I would hope so anyway.
However good commission products naturally are always going to get close scrutiny from both client and investor.
Wonder how many bankers bought in to this market. Mmm
report thisGillian Cardy
May 10, 2010 at 12:43
But WAS this product regulated by the FSA??
The absence of pages of small print in the presentation is to me a bit of a giveaway ...
I'd like to see a sample product illustration and suitability letter ... go for it Mr Lander!!
This is where the relevant informtion ought to be found ... and will show clearly what clients and their advisers knew or didn't know ... while this is a fascinating presentation it's only half the story!!
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