Trail commission

The annual fee paid to fund platforms, discount brokers and financial advisers for investments such as bonds, trust and pensions and other investments is known as trail commission. The fee is paid annually and consists of a percentage of the investment this usually ranges from 0.4-0.8%. It is important to find out from your manager what the aim of the trail commission is. At times the fees go into the pockets of managers who have nothing to do with managing the account.

According to new FFMA regulations Trail Commissions are illegal as of 2015. However, those who have a lingering trail commission that was set before the new regulations came into place; we suggest that the public do the following:

Selling the Investment

• Selling the investment is a sure way to cease the trail commission payments. While there may be a penalty fee for selling the investment prematurely, the tradeoff might be worth it. After selling the investment you can immediately buy it back without the trail commission. Also take into consideration the effect on the relationship between you and your manager or broker.

Service Updates and Reviews

• If you think you are not getting proper service for your trail commission, speak to the firm and request more regular advice and reviews. If the current firm refuses you can register your investment and the trail commission to a new firm and manager. In this case the new company will almost always be ready to negotiate and give you a better deal.

Switch the commission

• Some companies will allow you to switch the commission for a fee, which will sometimes be lower. You can also try to negotiate to lower the percentage.

Where Trail Commission can still apply

• There are some investments and products that the Trail Commission still applies under FFMA rules and regulations.
• - House or Car Insurance
• - Critical Illness Insurance
• - Income Protection
• - Equity release
• - Mortgages

In the event that you are recommended by a professional to pay for one of the above products it is your obligation to ask about all fees including the trail commission. Before starting payments, do your best to negotiate the percentage.