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Aegon: Why we launched cash-rebate model despite FSA plans

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Aegon says it is operating a cash-rebate model on its at-retirement platform and plans to do so until the FSA comes out with rules stating that it cannot so do.

Aegon Retirement Choices soft-launched on Monday to 50 adviser firms and will roll out to the wider market in the early part of 2012. At launch, the platform will have around 1,500 insured and authorised funds and over 2,000 investment options, which it says will include ETFs, investment trusts and direct equities. It operates a tiered aggregate platform charge starting at 0.6 per cent for assets under £30,000 down to 0.2 per cent for assets over £1m.

Aegon UK platform director Gordon Greig says the company sees a cash-rebate model as the most beneficial for clients and advisers alike.

He says: “Aegon’s proposition uses cash rebates that we will pay in full, directly into clients’ cash accounts. We believe it is a fair way of doing things, it is transparent and the client can see exactly what is going on. We do not believe there is any bias created in that scenario.”

In August, the FSA published its platform policy statement, saying it would be “desirable” to ban both cash rebates from product providers to investors and product provider payments to platforms but it said it wanted to conduct further research into the implications of the rules before they were finalised.

It has set no date to complete its research but says any new rules will not come into force until after the RDR deadline on December 31, 2012.

Greig says Aegon had to build the platform according to the rules already in place. He says: “We could not build the platform on the basis that the FSA may or may not change the rules, so we have built it on a cash-rebate model but are keeping a close eye on the way the FSA is moving. We do not think unit rebates are a good way to go because it would be difficult to achieve and clients would probably not be able to understand how they work.”

In March, Aegon announced it will use Novia as its administration partner in a deal that will run for up to five years while Money Marketing revealed in July 2010 that the technology is being supplied by GBST.

Greig says outsourcing the technology and administration has enabled a quick entry to market. He says: “Developing our own IT was something we ruled out at an early stage because we are not an IT provider. The new technology and different way of thinking through Novia and GBST was something we wanted to bring into the company. These partnerships have meant we could bring the platform to market well in advance of the RDR.”

Greig believes an at-retirement platform will be of greater appeal to advisers and clients because current platforms are focused on accumulating assets rather than offering clients specific plans for retirement.

He says: “We have gone beyond accumulating wealth and we are looking at how to offer customers a flexible income to help them through retirement. We are trying to focus on customer outcomes rather than accumulation of assets.”

As well as ARC, Aegon is also working on the development of its workplace savings proposition, which its says will become available in early 2012.

Greig says: “The technology underpinning the two propositions is the same but we have to make the workplace offering different in terms of usability because it will be more consumer-focused.”

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Readers' comments (4)

  • The FSA's procrastination in this area is unforgivable. How anyone is to supposed to plan a business in this challenging environment while the regulator dithers is beyond me.

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  • Hmm. Or maybe Novia haven't got the technology ready to allow Aegon to do anything else yet?

    Positive spin anyone?

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  • AEGON don't seem to have a clue what it is doing strategically and has lost its way. More clutching at straws I'm afraid.. Sad.

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  • Aegon needs to rethink all of their strategies and get themselves on the right path. Merchant Cash Advance

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