Trail commission

Paying trail commission

Trail commission is an annual fee paid to financial advisers over the lifetime of products. These include:

• pensions
• with-profits bonds
• unit trusts

It’s also paid to intermediaries, such as discount brokers and fund platforms, that recommended or helped you buy funds or other investments.

Trail commission is a percentage fee, typically 0.5%, taken from the sum of your investment each year. It may be included in your annual management charge, so it may not always be clear that you’re paying it or how much it costs you.

The payments may have been intended to cover an ongoing service. But it’s often paid to advisers without them reviewing your investments or providing additional advice.

How to stop or reduce trail commission

If you got advice on investments before 31 December 2012, you may still have to pay trail commission. But there are ways to stop or reduce the amount you’re paying.

Sell your investment

One way to stop paying trail commission is to sell the investment. But you should check whether there are any penalties attached to selling it and consider getting professional advice, such as from a tax expert.

If you do choose to sell the investment, you could then buy the same or a similar product, which wouldn’t include trail commission.

Make sure you find out what it would cost for your adviser or an intermediary to arrange the new investment. Think about what sort of advice you might want in the future to make sure it’s worth it.

Ask for a better service

If you think you haven’t been given a good service as part of the trail commission, ask if your adviser will provide it in the future. This may include ongoing advice or an annual review.

If your adviser won’t provide additional services, you might think about finding a new one who will.

It’s important to know that moving to a new adviser won’t end your trail commission. But you can arrange to move the trail commission to your new adviser, who’ll then provide additional services for that commission.

Your new adviser will be able to arrange this for you.

Claim the commission

Many advisers and intermediaries rebate (pay back) some or all the trail commission you pay on an investment. In return, you may have to pay a transaction fee, annual charge, or both.

If your adviser doesn’t offer to pay back the trail commission, you could consider switching to an adviser who will.

The amount that advisers, discount brokers and fund platforms return to you can vary, so it pays to shop around.

You'll still pay commission in some circumstances

You'll still have to pay commission (and trail commission) for some products. These include life insurance products, like investment bonds and with-profits bonds.

Switching funds within these policies, on the recommendation of an adviser, won’t end trail commission. But, if you’re advised to invest more money in the product, you’ll pay an agreed fee rather than commission.

The ban on commission also doesn’t apply to: 

• insurance policies, such as for your car or home
• protection products like critical illness
• income protection
• mortgages
• equity release products

If your adviser recommends a product that still involves you paying commission, ask about the cost and why it’s the most suitable product for you.

You can also ask your adviser if they’ll accept an agreed fee rather than being paid by commission. And, if they can’t, you can ask if they’ll rebate the commission to you.

Intermediaries may still get commission (and trail commission) as long as they only give investment information and buy products on your behalf. They can’t charge commission when they provide personal advice or a specific recommendation.