Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a651091

L&G reveals charges for 150-strong adviser force

by Michelle Abrego on Jan 15, 2013 at 14:40

L&G reveals charges for 150-strong adviser force

Legal & General (L&G) has unveiled details of its adviser charging structure for its 150-strong sales force which work in a number of building societies across the UK.

The life company has exclusivity deals with six building societies, meaning their in-house advice service is provided by an L&G adviser who advises on L&G products.

Alongside its deal to provide products for Nationwide’s advice service, these deals give L&G access to around 85% of the UK’s building society assets.

Under the retail distribution review charging structure L&G advisers will only apply advice charges when a client decides to proceed with their recommendation and purchase a product.

There will be 3.5% initial charge and an ongoing annual charge of 0.65% of their portfolio, including sums which have been invested without advice.

Where funds are held on a platform clients will be charged a fee as follows:

  • Portfolios up to £10,000: 0.7%
  • Between £10,000 and £20,000: 0.35%
  • Over £20,000: 0.25%.

The ongoing service for clients includes:

  • Proactive contact from a financial adviser at least once a year
  • A personal report twice a year, showing a breakdown of investments and performance
  • Access to a personal finance website which allows clients to monitor and view their portfolio 24 hours a day, seven days a week.
  • Access to the life company’s online benefit website that allows clients access to monitor and improve health and wellbeing.

There will be an additional 0.5% charge each year for clients who buy an L&G’s Select Portfolio Bond, to cover its set up and management.

In November 2012 L&G confirmed single-tied distribution partnerships with Yorkshire, Leeds, Dudley, Tipton & Coseley, Cambridge and Leek building societies, along with Virgin Money. It has access to around 20 million account holders in the UK.

L&G has around 20 partnerships with building societies, which operate a variety of different models including single tied deals, providing advisers, and sitting on multi-tied panels, said Chris Last, L&G managing director of banks and building societies.

33 comments so far. Why not have your say?

Mike WOI

Jan 15, 2013 at 15:07

All this and restricted advice to, absolutely fabulous - not

report this

Nigel Bracken

Jan 15, 2013 at 15:22

Yes a premium priced offering for full fat restricted - reduction in yields for anything less than 20 year terms will look horrific. I've lost track of the likes of SJP - what are they charging or is not possible to work out?

report this

SteveO

Jan 15, 2013 at 15:26

@Nigel

SJP will cost more than an IFA but it will look less

report this

Yaya Toure's wallet

Jan 15, 2013 at 15:27

The 0.25% platform charge on assets over £20,000 is very competitive and the annual service charge/renewal fee of 0.65% is lower than many IFA's too, despite them offering access to many leading funds - Jupiter; Schroder; M&G and INVESCO Perpetual. The 3.5% Initial fee is high however and what is not shown is the separate fund charge - is this going to be in clean unit classes of c. 0.5 - 0.75%pa? If so it looks competitive if not then clearly not. Also are their any transaction fees in future to move from fund A to fund B? If you get hit with another 3.5% then again not attractive.

What is not attractive is their Bond offering as the annual charges typically are well over 2.0% pa and now they are adding a further 0,5% for bonds, plus a platform and an adviser fee too! Unless of course they are reducing the annual charges within their bonds - you never know!?!

For clarity I do not work for them and have not for more than four years - but did for a time. Good old IFA me!

report this

John Smyth 3

Jan 15, 2013 at 15:32

Interesting to see that they will only charge a fee if a sale is made. How then can they be described as advisers instead of salesmen or women as they should be. No doubt with huge targets and still charging additional premiums for their protection products in order to pay higher commission to the building society and rip off the naive members of the public who need protecting most.

Wonderful acheivemnt for RDR, the FSA, Sants etc.

Notice also the banks are creeping back in with their so called advice charges having all declared not so long ago that they were pulling out of the advice market altogether. Some less than wise IFAs actually believed they would.

report this

Polfers

Jan 15, 2013 at 15:40

After enduring all this upheaval and the vast cost and complexity involved, can someone please explain to me where the "better customer outcomes" benefits to the consumer are in all this? No. Thought not.

By the way, talking of Legal & General (and I'm sure they are not alone in this), I recently discovered that commission on Investment products is alive and well.

I submitted pre December 2012 an annuity case to L&G that had an agreed fee for advice to be taken before crystallisation. Should be straight forward, then? Err, no. 'fraid not.

Apparently, although the client opted to have the fee paid from his pot, the fee cannot be paid until all transfers in have been received and acknowledged and the annuity paid. This despite the fact that within a week of the submission, there was hugely sufficient funds available to pay my modest fee of £750.

The cherry on top, though, is that apparently, if the client (who has happily signed an agreement paying for advice and not a product remember), decides to send in their cancellation notice, L & G claw the fee back from the adviser...

Now, correct me if I’m wrong, but I thought fees weren’t dependent on the sale of a product, but on the provision of advice. Therefore:

(a) why can a fee not be paid until all monies from all ceding providers have been received? Platforms don't seem to have this problem.

(b) If the fee is for the advice and not for the product, and has been agreed by the client in writing backed by signatures, how, prey, can it be claw- back-able then?

(c) I thought RDR was meant to put remuneration in the hands of the client and their adviser, not leave it with the product provider. So why then, are product providers controlling remuneration and treating fees like a commission?

I actually got an answer to this last point from L&G from a senior person involved in their RDR implementation discussions with the FSA. L&G's response? "The FSA didn't say we COULDN'T do it this way" !!!!!!!!!!!

What else will this type of practice apply to, one wonders?

Answers on a postcard please to: Mr Happy Hector Sants, Helipad Villa, Fantasy Island, somewhere in the Caribbean

report this

Mark Angus

Jan 15, 2013 at 15:54

The more things change the more they stay the same.

report this

Fascinating

Jan 15, 2013 at 16:01

Oh dear. This is just commission from L&G. John Smyth 3, you're absolutely right.

It strikes me that product providers along with many others are trying to behave as if nothing has changed. You are right as well - there is no way a product provider should be able to claw back an advice charge. By definition, this cannot be done.

Banks and providers trying to shoehorn the new rules into what they have always done. Shambles.

report this

Julian D

Jan 15, 2013 at 16:03

Assuming £100k invested on a platform the total cost (excluding fund AMC) is 1.455%pa. Therefore assuming actively managed funds we're talking circa 2.5%pa or more...plus 3.5% upfront!

I like this, it means we have less competition and can quite clearly quote the amounts charged by the (previously free?!!) bank assurers now that everything is out in the open.

report this

Interested party

Jan 15, 2013 at 16:07

@ Julian D, think I'll put my fees up, I can't possibly provide an impartial service for less than the cost of a tied sale!

report this

Nigel Bracken

Jan 15, 2013 at 16:09

@ Polfers

L&G's pdf guide to the changes to it's ToB says this

"Where a client exercises its right to cancel a product, we will not, unless required to do otherwise as set out in the Adviser Charge and Consultancy Charge Facilitation Schedule, reclaim the AC or CC from the intermediary and so refunds to the client will be net of the AC or CC (see clause 7.10).

The Schedule they refer to specifically states AC will be clawed back on annuities, pension transfers and workplace pensions if client cancels - not entirely logical to me why this should be so - if a pension transfer is invested falls 25% the next day when Greece collapses say, client cancels the day after that - will L&G refund the full transfer back to the ceding scheme? I think not.

Do other insurers feel the sameway - if not vote with our feet?

report this

Jonathan Kirby

Jan 15, 2013 at 16:10

And of course being L&G its mainly going to be trackers!!

report this

Richard Hardy

Jan 15, 2013 at 16:10

This RDR has been well thought through hasn't it !!!

report this

Mike WOI

Jan 15, 2013 at 16:18

Shabba

report this

Yaya Toure's wallet

Jan 15, 2013 at 16:19

Hi Julian D. I think your figures are a little out. The platform charge is 0.25% and adviser annual fee 0.65% = 0.9% - assuming S&S ISA and UT/OEIC's. Then fund charges of say 0.25% - 1.5% AMC (Index trackers - Actives) = 1.15% - 2.4% in total. I know that the TER is a bit more too, but that is the same which ever route a client invests so not relevant in comparing L&G to an IFA platform route or direct even....

I agree the 3.5% initial is high as is the additional bond cost too. However annually for a S&S ISA or UT/OEIC it is not an exceptionally high fee. Also the fund choice is wider than just L&G - they white label Cofunds as the L&G IPS don't forget.

As I said above I used to work for them but am not an apologist for them! Just offering a bit of balance.

report this

Martin Hayward

Jan 15, 2013 at 16:24

So they can take 3.5% on a £10k or a £100k with the same investment answers, thought this was going to stop....ooops

report this

PAUL JONES

Jan 15, 2013 at 16:55

If there is an additionall charge on the bond 0.5% will this be apart of the 5% withdrawals i.e client can withdraw a further 4.5% without chargable event.

report this

alan mcintosh

Jan 15, 2013 at 17:33

Forget the intial, can they provide the ongoing service to justify the ongoing fees.This is something that has been negelected in the past by direct sales forces, and i doubt whether the regulator shall put up with it in the future if this is seen to not being carried out in a professional manner.

report this

alan mcintosh

Jan 15, 2013 at 17:43

Forget the intisl fees,can they provide the service that is required in return for the ongoing fees. This is where most direct services failed in the past, and I do not see this changing in the future unless the sales advisor is clearly given the task to manage their clients financial expectations in the fullness of time.This has to also be monitored closely by the companies compliance personnel,so that the client is not disadvantaged eg an expected annual review and everything this entails.this is something the regulator is going to watch like a hawk in the coming years.

report this

Anitaki

Jan 15, 2013 at 17:50

A clueless regulator regulates a rudderless industry

report this

David IFA

Jan 15, 2013 at 18:03

This is shocking ... not. What did you expect from the FSA. This is typical of the double standards in the industry. It is now just unravelling in the bright light of day ie post RDR reality. The FSA will allow the banks to get away with it, because the banks control the country and treasury.

FSA to blame. They will just turn round and say the rules were not drawn up on our watch but our predecessers.

Good old Sir Hector. Now you can see why he has joined Barclays on £3 million pounds a year, its his just reward for favours rendered.

report this

Julian D

Jan 15, 2013 at 18:20

@ Yaya Toure's wallet

I think you'll find the platform charge is tiered and therefore a £100,000 investment has a platform charge of 0.305%pa. Added to this is the advice charge of 0.65% comes to 0.805%pa.

My example was for an investment bond which would indeed incur an additional 0.5% per annum taking the total cost excluding fund charges to 1.455%pa. Allowing for a notional AMC for investment funds of 1% , my estimation of approximately 2.5% was pretty much on the money.

I must be honest I would be very surprised if any tied (oops, restricted) adviser working for L&G through a building society would be very interested in undertaking CGT calculations for clients each year, so most likely I would expect them to continue going down the investment bond route as they have always done.

report this

Martin Hayward

Jan 15, 2013 at 18:24

and what are we going to do about it, nothing as usual. No one has the balls to sort it out,

report this

richard john brydon

Jan 15, 2013 at 19:18

Do we really care what L&G does?

report this

Disappointed via mobile

Jan 15, 2013 at 19:31

L&G will charge 5% for any investment with a trust or anything related to IHT planning. Targets or earnings potential has increased by 48% compared to last year. Bond charges have increased overall and as they are a VIB they aim to break even on the adviser front but make money on the management charges; as always. Advisers have been told to ignore servicing existing clients as the trail will continue if no switches occur! No incentive to review clients, only new clients. Strike action mulled with many, others looking to escape. Big brother is watching and bank assurance has come home to roost. Targets targets targets! I feel sorry both for the advisers and legacy clients. I've chatted to several looking for jobs as the firm sees them as disposable due to the collapse in bank assurance rolls.

It's a shame as the proposition was good when the advisers were targeted on conversion rather than a set target. Now they are getting performance managed and it won't be long before serious complaints start over flogging commission led product groups.

report this

anthony hewkin

Jan 16, 2013 at 09:04

Commission by another name - unless someone can explain otherwise - a % of the figure invested and " no charge unless you buy gov " why am I not surprised ? But to be fair is that any different to what most advice firms are offering - IFA or restricted ? I guess the difference here is that the advice charges for L&G have been made public and therefore open for comment.

report this

David IFA

Jan 16, 2013 at 11:05

Word of warning! Just watch your clients with L&G products. When advisers have targets and managers have goals for them all decent logic goes out the window.Charges to be applied to existing contracts without trail. Bad old days gone. Watch this space.....

report this

Barney Stackhouse

Jan 16, 2013 at 13:08

Don't forget of course that L&G will be charging each business partner company £525 + VAT (£612 inc VAT) per month per adviser in fixed fees so every wealth licenced adviser will either need to get approx £1.6m funds under management very quickly at 0.65% or write a further £20k p.m. in lump sums at 3.5% initial to cover the monthly fees. I understand that L&G intend to 'take' 25% of the 0.65 adviser charge so the business partner company will get 0.4875%. They might also choose to try to sell more protection business to subsidise the monthly wealth fees. Happy days eh?

report this

Dave

Jan 16, 2013 at 14:36

There have been a number of comments regarding % fees and how RDR was meant to stop fees being conditional on the sale of the product. I must admit, I never thought that this was what RDR was trying to do. I thought that its two aims were to increase the levels of qualifications and to stop Providers deciding how much commission should be paid.

If a firm wants to charge only on the sale of a product because that suits them and their clients then fine....as long as the clients are happy and agree with this at outset

if a firm wants to charge a % fee on the investments that are made, then fine....as long as the clients are happy and agree with this at outset

Is this commission by another name. Possibly, because adviser earnings are determined by how much is invested. Was this meant to be stopped by RDR? No because it is no longer the provider deciding this, it is the client.

Has the RDR improved anything for clients? probably not

report this

Richard Macmillan

Jan 19, 2013 at 11:58

Product, product product!!!!

report this

Mark Jeffries

Jan 19, 2013 at 14:00

Julian D

Do we assume that IFAs have been diligently recommending OEICS?UTs to their clients and calculating CGT liabilities every year as part of their 0.5% trail? In my experience, IFAs are in no position to claim the moral high ground in choosing collectives over bonds, or working hard to justify their trail income. Many IFAs I come across (active in investments) have never recommended a collective in years, and will fabricate the 'tax wrapper analysis' tools to favour a bond (often churned).

report this

Barney Stackhouse

Jan 20, 2013 at 21:21

Mark Jeffries

Well said, that's what my experience tells me too. What with the smoke and mirrors around charges applied by many life companies I would say that both tied agents and IFA's have used the 'no set up costs' or 'enhanced allocation rate' tool to justify bonds for years.

Not that the 'up to' 7.5% initial PLUS 0.5% annual on bonds had anything to do with it over the lowly 3% initial on most collectives (lol)

As for calculating capital gains on collectives, it doesn't happen.

report this

Barney Stackhouse

Jan 20, 2013 at 21:21

Mark Jeffries

Well said, that's what my experience tells me too. What with the smoke and mirrors around charges applied by many life companies I would say that both tied agents and IFA's have used the 'no set up costs' or 'enhanced allocation rate' tool to justify bonds for years.

Not that the 'up to' 7.5% initial PLUS 0.5% annual on bonds had anything to do with it over the lowly 3% initial on most collectives (lol)

As for calculating capital gains on collectives, it doesn't happen.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Opportunities emerge as production moves back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

A spotlight on Alastair Mundy


Alastair Mundy met Citywire's Daniel Grote at the London Stock Exchange Studios for a detailed interview about the Investec Cautious Managed fund.

More about this article:

Look up the shares

  • Nationwide Building Society
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Legal & General Group PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive


Read more...

FCA wins battle to fine fund manager £2.7m

by Michelle Abrego on Jul 30, 2014 at 10:11

Sorry, this link is not
quite ready yet