Friends and Aviva in commission clash
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Friends Provident chief executive Trevor Matthews has sparked a row with Aviva after suggesting that commission-paying firms should use the retail distribution review as an excuse to exit the “suicidal” commission market for group pensions.
The RDR will ban commission on new business but providers can continue paying commission on contributions for new entrants and increments to existing schemes.
In an interview with Money Marketing, Matthews says: “The companies still paying commission think it is good from a marketing point of view. It will be interesting to see whether, come 2012, those firms continue to pay commission on existing business or not.
“Whatever they say, I am sure they do not like paying commission. They know the numbers as well as we do and the numbers do not make sense. It is just suicide as far as I can see.”
Aviva has confirmed it has no plans to stop paying commission after the RDR and has slammed Friends for attacking the commission-based market after being an active member of the sector before the firm’s strategic review in 2008.
Head of pensions Paul Goodwin says: “It is strange Friends Provident, which up until quite recently was one of the highest-paying commission players in the market, is now all of a sudden saying yesterday it was good but today it is bad.
“We fully intend to continue to pay commission for schemes written prior to the RDR. Why would we not? It is a market we are comfortable with and we think it is profitable.”
Scottish Widows says it has no plans to remove commission on existing schemes from 2012 while Aegon has only committed to paying commission until the RDR is implemented.
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Readers' comments (17)
Realist | 15 Apr 2010 1:14 pm
Love it!
FP run out of capital and then try and slate the model which they were running which helped to cause it. Good on Aviva for calling them on it
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Julian Stevens | 15 Apr 2010 1:20 pm
No provider should need an excuse to stop paying commission. They should have got with (flexible) CAR five years ago.
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Anonymous | 15 Apr 2010 1:21 pm
Thats the one reason the RDR was bought in - to bail out the insurance companies, who with all their highly paid actuarial experience stated that Stakeholder/GPP at an AMC of 1% was viable (even with initial commission).
It would have been far easier for all if they had just stood up and admitted they were wrong but no, lets cloak it all, invent the RDR and blame the greedy IFA.
Ironical now that on a lot of 'factory gate' pricing the AMC's are still around 1% (....or is that an Administerative AMC with a Fund AMC on top...)
Never mind, by 2012 it will all be under the Resolution banner... a far greater threat..
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Incompetent Regulators Awards Team | 15 Apr 2010 1:24 pm
Why doesn't Freinds Prov just call itself 'The FSA punch bag'. What a pathetic company which was one of the best many years ago to one of the worst in my opnion. Now that they have been propped up by intermediaries after all these years once again they turn their back on the people who supported them, just like they did when they jumped into bed with Abbey National to sell their below par endowments.
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Paul Davis | 15 Apr 2010 1:27 pm
Lets not forget TCF and what is deemed to be fair value for money.
With the implementation of RDR employers will be much more aware of the potential commissions available and may well question what they are getting for this and the adviser will need to justify and quantify the amount of money paid versus fees.
The harsh reality of this is that advisers will need to provide an ongoing quantifiable service as this will be key to maintaining the business, the days of earning easy money are over.
Let the gloves come off and may the games begin, complacency is no longer an option!
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Richard Jacobs | 15 Apr 2010 1:27 pm
As always the IFA is at the beck and call of the insurer. I have many small company group schemes where commission is fully disclosed and accepted by both employer and employee. Neither would want fees so where will they be left if commission is stopped. We all know fees are the right way forward but for exsisting schemes that will be very difficult.
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Alan Redwood | 15 Apr 2010 1:29 pm
I fully support Paul Goodwin and it annoys me that Trevor Matthews has clearly forgotten that IFA's have placed business with Friends Provident in good faith that we were entering into a long term contract on behalf of our clients with a Company that would remunerate us for our work instead of us charging the client. Trevor seems happy to change the terms of this "contract" by using RDR as an excuse to transfer the cost to the client.
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Brian Harrison | 15 Apr 2010 1:48 pm
At the end of the day it must be service and value to the client.
In my experience Friends Provident service standards are vastly inferior to AVIVA and rarely do they get it right at the first or even at the second attempt. If Friends Provident is thinking its loss of market share is due to commission they should think again, their service standards are inferior and who invites problems. Those in ivory towers should visit the ground floor occationally to see what the real world is about.
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Anonymous | 15 Apr 2010 2:00 pm
Can we have a statement then from Mr Matthews as to whether Friends Provident intend to pay commission on existing and new members to existing scheme business after 2012..? He's got all the others to state what they are doing..
I feel the need to switch.. :) especially away from Resolution.. and anything that involves Mr Matthews as the pair of them carve a pathway of destruction though the insurance industry.
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maos Titburn | 15 Apr 2010 2:26 pm
worreid about how we are going to get paid? its about time we got rid of commission bias - every day in this site we hear of yet another IFA embezeling millions from clients. the sooner this happens the better. I'm glad tervor matthews is taking this stand. i for one am embarrised with the whole of financial services
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