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ABI chairman: Legacy of commission is ‘open sore’ that undermines consumer trust

Commission paid to advisers is an “open sore” that continues to undermine confidence in the insurance industry, ABI chair and AXA UK group chief executive Paul Evans says.

Speaking at the ABI retirement conference today, Evans said it is “humiliating” that the insurance industry is less trusted than banks and estate agents.

He said: “We will be pushed aside if we do not rapidly re-earn the trust lost over past decades. Decades during which the business model was different because of adviser commission, the legacy of which is an open sore that continues to undermine trust in what is now a completely diffferent proposition.

“That our sector has lower consumer trust than the banks with all their troubles, is embarrassing. That we are trusted less than estate agents is frankly humiliating.

Regulation is also preventing insurers dealing with customers trapped in old pension plans that offer poor value for money compared to modern products, Evans said.

The ABI has previously called for the Government to make a “bold” move and grant providers the power to bulk transfer customers out of legacy schemes without having to get consent.

Evans said: “Wouldn’t it be wonderful if we could upgrade our customers to our latest pension offering? There’d be commercial challenges with some legacy products, but surely that would be more than offset in the costs of maintaince of the IT systems many of us have to maintain?

“Instead at the very notion of an upgrade, regulation steps in with a new advice point.

“We should be able to offer our existing customers our latest digital products while rapidly decommissioning old systems, enabling us to reduce cost.”


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. Don’t agree at all. Commission wasn’t the problem unscrupulous advisers were. If product providers didn’t offer different commission rates then the bad advisers wouldn’t be tempted to follow commission over advice. At least commission had a framework where now its a blank cheque book on fees. Tell me how that helps the vulnerable against the scum bags?

  2. He may have a point PROVIDED that he won’t trouser the money. If this is then either rebated to clients or used to reduce premiums pro rata, is 100% transparent and TCF, I would go along with that.

    But I have a feeling that this is self-serving cant.

  3. The ABI is an ‘open sore’ with a history of anti IFA sentiment. The ABI itself is a dinosaur facing extinction but propped up by a number of life office dinosaurs themselves facing extinction. By this I mean poor quality product providers whose offering is so week that most independent distribution has voted with its feet. In return they want to renege of contractually owed commission as a fight back.

    The only future for many ABI members is by the destruction of independent distribution, then be replaced by tied distribution forcing consumers into the purchase of poor quality products sold by agents without choice and indeed this is the ABI stated policy!

    This all dates back to the ABI draft response to the FSA’s retail distribution review, which confirmed the ABI opposition to the current IFA distribution model. These are not new ABI proposals and they are designed to form the FCA thinking. I trust the FCA will see through the ABI and understand that it is a body representing poor quality anachronistic product providers who are already history and who want to be free of paying contractually due legacy commission in response to being deserted by new business by those remaining advisers who have a choice.

  4. Surely the real open sore, is publicity seeking, self serving headline grabbers like Paul Evans who offer opinions as facts.

    He should resign from the ABI immediately and just concentrate on extracting as much profit as possible from AXA clients as he has most probably always done.

  5. Remember the days when this lot were falling over themselves to purchase estate agents?

  6. The moral high ground is a difficult place to be. Are AXA going to stop paying commission on all savings, protection and whilst at it GI product.

    I wonder whether the rest of the ABI want to see commission removed on GI products ?

  7. So the suggestion by the ABI Chairman is that it was those dreadful IFAs taking massive commissions that caused the lack of trust? Thus either the providers were not ABI members, or alternatively ABI members were forced against their will to offer such commissions.
    Must be one of these because if not that would leave only one option- Harry’s suggestion that the Chairman’s comments are self serving cant………………..

  8. I will give the chair of the ABI the benefit of the doubt as as Harry says, his words sound quite reasonable, BUT so do Simon Mansells and the other responses.
    It rather reminds me of episodes of Mock the week where they do political speak and then another one translates the words in to what they intend doing in practice!

  9. Mr Evans says ‘It is humiliating that the insurance industry is less trusted than the banks or estate agents’. That’s interesting – I have built up a small family IFA firm over the last 14 years on nothing other than client recommendations. We have never knowingly lost a client to another IFA, and we continue to receive a steady flow of referrals from existing clients. I assume these clients trust us, as they keep sending us new clients!

    I’m not too bothered about how the industry is ‘reportedly perceived to be perceived’, and I suspect that the overwhelming majority of financial advisers can take the same pride as I can in how we have built our business and how we treat our clients!

  10. in those famous words “Well he would say that wouldn’t he”. Must be looking for an FCA grav – sorry – job.

    Evans said it is “humiliating” that the insurance industry is less trusted than banks and estate agents, I assume there is a survey somewhere that confirms this?

  11. Commission was the drug/ Advisers were the addicts…so we were continually told by a certain Mr Fisher.

    On that basis Axa can only be considered a dealer/ pusher so the open sore Mr Evans is yours I am afraid to say.

  12. Rubbish the Assoc. of British Insurers are protectors of any insurer registered in this County who are members.

    To suggest they are a public interest body. Suggest ‘Conflict of Interest’. More likely the big bad wolf.

  13. This is my very favourite bit…

    “Regulation is also preventing insurers dealing with customers trapped in old pension plans that offer poor value for money compared to modern products, Evans said.”

    Really?? So the FCA will prevent you from reducing the horrific charges on legacy products and putting those clients onto modern systems. I don’t think so. They don’t need advice for you to reduce the costs and improve the options. What utter nonsense.

    Truth is, many ABI members continue to milk their policyholders through hefty charges on crappy old products and this is how they like it. No wonder they are trusted less than estate agents.

    IFA’s on the other hand, as Buffalo Bill says above, seem to do rather well on the trust front. I seem to recall most of the problems being with Life Office Direct Sales, but maybe that’s just my selective memory.

  14. I remember Equitable Life boasting about how it paid no commission.

  15. Neil F Liversidge 26th February 2015 at 9:40 am

    There’s a strong stink of hypocrisy in these comments. Life assurance and other forms of protection NEED to be sold. There’s also an argument to say that where the less wealthy are concerned, so do savings and investment products, especially pensions. People need convincing that £50pm put away for their future is a better spend than £50pm on Sky TV, booze or fags. We advise everyone and sell to nobody these days, but when I set up my business I had to go out and sell like hell on term assurance and I make no apologies for it. Everyone family that’s got a life policy from me is more secure for it. When I do auto enrolment presentations I go flat out to encourage all the workers in a workplace to join the scheme and to tell them what the boss is putting in on their behalf. The government should be grateful that people like us SELL pensions and life assurance. We’re the people who’re keeping down everyone’s taxes in the future by keeping people off welfare. Salesmen have to be incentivised and where protection products are concerned commission works. Probably the worst single thing that happened was the death of the old LOA maximum commission agreement back in the early 1980s. Commission on savings and investment products should have been reformed and regulated, not banned. Now that it is banned a large part of the populace are not economically advisable. Back to Paul Evans’ comments, everyone knows that Equitable Life paid its own staff commission dressed up as bonuses and the management filled its boots. What did the ABI say about that? Nothing. What will the ABI say about how its vertically integrated members incentivise their sales forces? Nothing. I suspect Evans comments are a part of the insurers’ covert but obvious strategy of trying to control distribution via direct sales forces dressed up as ‘vertical integration’ and captive networks. Ah well, dream on Mr Evans. I’d rather have a leg off than work for an insurance company or anything resembling one. You and your pals ain’t vertically integrating me.

  16. @Neil – nicely put sir.
    I advise clients, but if they do not carry out what I advsie them to do, either my KYC is a failure or my explanation of the advice IS. I am not rigid in what I advise, I have NO preconceptions of my own I will consciously impose on a client, but I will very hard to understand where they are coming from before trying toi make the advice specific to them, which sometimes results in what could be seen on paper as some very odd advice. Hence why i record the meetings as a suitability report could prove about as much protection as a chocolate fireguard if a complaint goes to the FOS.

    I am quite happy working on fees and our fee structure is broken down in to research advice and intermediation so tthe FCA cannot accuse us of dealing bias. HOWEVER a dealing bias aligns client interest with that of the adviser in some circumstances so commission wasn’t bad, it was the perception of commission bias and now of dealing bias which is flawed, but that is what happens when you look at the Cvs on linked in of the staff at the F-pack who we have to routinely deal with. They are not bad people, they are just IGNORANT idiot savages with very good degrees in theory and little or no life experience.

  17. ‘Legacy of commission is ‘open sore’ that undermines consumer trust’

    Absolute nonsense from someone who has not one clue – You speak for yourself Evans old son !

    Another example of someone (and there are now countless numbers of theorists) talking from a position of total ignorance AND hypocrisy doesn’t even come close

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