Trailing Commissions


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Christmas has come early for Jillian Lazzara in the form of a cheque for $2,290. It was money she didn't even know she could claim.

Jillian has clawed back the trailing commissions she's paid over the past year on her mortgage, as well as those included in her life insurance and superannuation. "I thought why, not its free money. Well its not free money, its my money", Jillian said.

"A trailing commission is the money paid to someone who has sold a financial product to a customer for as long as that customer's money stays in the account", said Choice Magazine's, Christopher Zinn.

Christopher points out trailing commissions are usually hidden in the fine print of finance documents and they look like miniscule amounts, .6 of a percent on average. But they're an ongoing, very lucrative source of income for financial planners. "Its really money for jam. They perform a service one year and for every year that your money stays in the account, they keep getting their hit. Its a fantastic racket, people have got very rich out of it but it does consumers no favours", he said.

You can of course avoid products with trailing commissions -- industry super funds for instance don't charge them -- but if you do pay them, accountant Hamish Pym has devised a way to reclaim.

Hamish is the director of website Irefund. "Irefund acts as a broker. All brokers can claim trailing commissions, the difference between Irefund and the normal broker is we collect them for our customers, on behalf of our customers, and then give them back to them", Hamish said.

Here's how it works -- you hand over account numbers of insurances or super and they collect the trailing commissions, retaining the first $395 -- the rest is yours. "All your doing is changing the group authorised to collect the commissions, you're not changing any of the details, ownership or control of the underlying investments. Its just the way the industry's been set up and you, as the consumer, can choose who you want to receive the commissions on your financial products", Hamish said.

Jillian will now receive an annual cheque. The only catch is she had to refinance her home loan for Irefund to be able to claim commissions. "The average amount for Irefund is typically between one and two thousand dollars a year, however, we are paying out cheques for much larger figures than that,
13 - 14 thousand dollars in some cases", Hamish said.

Its money you can't reclaim on your own, only someone who holds an Australian Financial Services licence can reclaim trailing commissions, like your own accountant or financial adviser. "So you're not entitled to get it back but ultimately, whatever the Financial Services Industry say you end up paying for it one way or another -- you end up paying for the financial planner's holiday house or their boat or their car or whatever it is and really you want that money to be growing in your investments, not in terms of their assets", Christopher said.

"Our advice is to avoid products which have trailing commissions attached. Its going to make the planners cry crocodile tears right around Australia to hear that, but really, you need to look after your interests and not theirs", Christopher added.

For further information visit the website at:
or phone 1300 305 898 or fax: 1300 305 938