removing a requirement that financial advisers charging an ongoing fee or trailing commission ask their clients every two years whether they can continue to charge the fee.
The broker also gets a 0.25% annual trailing commission on the fund for as long as you stick with it.
According to SEC filings, Stanford Group Co., the investment advisory company affiliated with Stanford International, would get 3% commission on the aggregate sales of CDs by its advisers while the financial advisers would earn 1% up front and a potential trailing commission of another 1%.
The government's amendments would prohibit the payment of upfront and trailing commissions for general advice, but would allow incentive payments for general advice in certain situations.
The former Labor government introduced the new protections, which took effect last July, and included stricter requirements on financial advisers to provide information on so-called "trailing commissions" – regular small and often unnoticed payments which can cost even an average-earning superannuant almost $50,000 by the end of their working life.
(Small wonder. Brokers aren't eager for them to do it. "Annuicide," they call it, since such conversions kill their trailing commissions).
Between transaction fees, fund fees, sales loads, trailing commissions, 401(k) expenses, advisory fees, inflation, and taxes, investing can get expensive.
"Most people in this industry started off as stockbrokers, and built up a base of business tied to commission, and so when they register as an IAR so they can provide advice for a fee, they don't want all those trailing commissions to go away, so what they do is retain their securities license," says Waymire.
That is in addition to overrides, expenses, bonuses and trailing commissions, not to mention "expense-paid due diligence trips and educational seminars". Security Benefit defrays the cost by itself taking kickbacks of up to 0.4% of assets from the mutual fund firms whose funds it offers to teachers.
Some IFAs will also rebate trail commission if you do not want to receive ongoing advice from them.
If you are not receiving follow-up advice or reviews of your products, and your IFA is still receiving trail commission, then you need to ask what you are getting in return.
