Again, the insurance and finance industries are taking a big hit by government as it has been brought to their attention that investors have been paying residual service fees and annual charges for services they are not getting. According to the latest research, at least 90% of investors have no clue that they have even been assessed these fees which cumulatively have a total of almost £4 billion per year.
There will be statutory changes as a result of this research in that there are new rules which will become effective January 2013 whereby advisers will need to alter the way in which they charge for services. In effect, commissions on advisory services will be outlawed as of that date. The purpose behind this legislation is to make fees and charges much more transparent than they have been until now.
It was found that investors want aware of that they were paying an annual fee to advisers they no longer get services from. Perhaps they were offered advice in the very beginning but once a financial product is sold the advisor no longer has contact with the investor. There are no advertisements underway years down the road yet investors are still paying for advice they are not getting.
Although this is not the case in all circumstances it is widespread enough to deserve government attention. Even though there may be investors at the moment who would not object to paying a service fee if indeed they are getting advice, this will still need to change in the new year. Some see this practice of charging fees for services not rendered in the same light as mis-sold payment protection insurance was seen. It is being called a breach of ethics and as a result there are several ways in which investors can claim back money they paid for the services they never received.
