Ivan Massow, the entrepreneur who once ran the UK's 10th largest advice firm, is mounting a direct challenge to IFAs with a new online service to help consumers slash ongoing commission they pay for advice they no longer receive.
Paymemy.com, which launches today and is run by FSA-authorised Massow's Ltd, will rebate 80% of ongoing commissions to customers, while keeping 20%.
Customers of Paymemy.com simply have to provide their policy details online and complete a form authorising Massow's to contact their product provider to find out how much trail commission is being taken from their policy. The commission will then be paid to Massow's as agent and not their current adviser.
Massow launched the scheme by talking to a number of National newspapers over the weekend.
He said he is targeting the estimated 10 million clients who have been ‘orphaned' by financial advisers including those who haven't heard from their IFA in many years.
Massow told the Independent: "Most people simply don't know they're paying these [renewal commission] fees - not a single person I've asked knew of their existence."
The Paymemy.com website says : "most policies which have been set up by an IFA will carry some kind of on-going trail commission. These include: personal pensions, stockmarket ISAs, unit trusts and other collectives, life policies and endowments as well as offshore and onshore investment bonds."
Massow's does not hold client money but is required to hold adequate financial resources and have PII. It will not give advice but says it will refer clients to CII qualified financial advisers if required.
The site says: "We only refer you to IFAs who meet our strict 'value for money' criteria. Typically, most people only require a few hours of advice every few years, which should cost no more than a few hundred pounds. Currently, your financial adviser may be taking thousands of pounds EVERY year for doing less than this."
The site also warns consumers against some fee-based advisers:
"...If you have a good fee-based adviser they should be charging you a fair hourly rate (which in our opinion should be no more than £160 per hour), and be rebating all the commissions they receive. In theory this removes any bias the adviser can have towards a specific provider and ensures you only pay for the service you are receiving.
"The problem is that SOME fee-based advisers charge their annual fees as a percentage of your investment value, and therein lays the same risk as trail commissions, you could be charged for a service you are not receiving."
Commission payments from product providers to financial advisers will be banned from 1 January 2013. However, commission on business written before that date will be permitted to continue.
This has raised fears firms will build up their renewal income ahead of 2013 in a bid to swerve the rules, but the FSA has said it will monitor sales data for signs this is occurring.
Massow first made the headlines in the 1990s when he launched a crusade for fair mortgage and insurance premiums for gay men.
He opened Massow Financial Services from a squat in north London with just a mobile phone and the business grew to become one of the 10 biggest financial advice firms in the UK in 1997. At its peak, the company was valued at more than £20m but by 2002 it had gone into receivership.
Massow took a payment to become an agent of Zurich, which he alleged then refused to issue cover to the bulk of his gay male client base and his business folded. He began legal action against Zurich but the insurer rejected the allegations and the court ruled against Massow.
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