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Adviser anger over Axa annuity commission share offer

An adviser has hit out at Axa Wealth for contacting his client directly with a quote for a Legal & General annuity and offering to share the 2.5 per cent commission with the adviser if the client buys the plan.

On November 24, Axa Wealth sent a wake-up pack to IFG consultant Nigel Stratton’s client, who has a £434,000 pension fund. The letter, seen by Money Marketing, says L&G is Axa’s annuity partner and a comparison of the two providers shows L&G would offer a higher income. It adds that the client should shop around.

On the same day, Axa Wealth wrote to Stratton saying it will share the 2.5 per cent commission if the client buys the annuity after taking advice.

The letter says: “The L&G illustration takes into account the total commission payable. This assumes a total payment of 2.5 per cent of the purchase price which is payable to Axa Wealth Limited and yourselves.

“Should this quote be accepted and your client indicates that your firm has provided advice with respect to the application, L&G will share the commission between you and Axa Wealth.”

Stratton says: “It is extremely annoying that Axa has contacted my client and recommended a product when it does not know the client. Then it has the gall to say it will share the commission, which is high. I would expect it to be 1.5 per cent at the most.”

An Axa spokesman says the firm did not make a recommendation to the client but rather highlighted a quote from its preferred provider in accordance with best practice, which included telling the client to shop around. He says the 2.5 per cent commission offered to Axa by L&G has no bearing on the annuity rate offered to the client. The spokesman says: ‘We have followed correct procedures, in particular in regard to the OMO and duty of care to our clients.”

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Comments

There are 21 comments at the moment, we would love to hear your opinion too.

  1. Welcome to the new world folks – it’s a spiv fest!

  2. I always thought sharing/refunding commission on a pension product could result in scheme approval being withdrawn. Does the same apply to annuities? Answers on a postcard please

  3. Would someone really use the Elevate platform now with AXA Wealth, after reading this ?

  4. Things will only get worse after RDR!!!!!

  5. Appalled.
    From my knowledge of directly marketed/bog standard annuity illustrations from providers they confront the client with a very limited range of options, completely lacking the nuances which result from face to face meetings.

    And to think £400k plus is on the roulette wheel.

  6. I have to say, no surprises here, but hopefully a wake up call for all those advisers that think these big players are going to respect your links with your clients… the sooner people get out of the life office controlled sector for investments, the better…. and I would suggest Platforms that are not owned by Life Offices would be a good plan!!!

  7. this is not new its been going on for years and the likes of Allied Dunbar / Zurich have been paid far higher commission than the odinarly IFA intoducing business to the company (not only L & G)

  8. I’m not surprised, sadly. A client of mine was retiring and was sent a quote by his PP provider, Zurich. The annuity illustration was from L&G and showed that Zurich would be paid THREE times as much commission as we would be for the same annuity. Ironically, L&G’s quote was the best available for this particular client.

    So we had a choice – do the work ourselves or let Zurich do it (they paid us what L&G would have and kept the rest for themselves). We nearly did it ourselves just to spite them! I hope RDR puts a stop to this.

  9. If this has been accurately reported, the AXA spokeswoman either (a) hadn’t read the letter (b) hadn’t understood the question or (c) was hors de son arbre.

  10. I know that Skandia also do this with L&G, except they keep all of the commission from the annuity(on older plans i believe) – platforms still the way forward people?

  11. Friends Provident – sorry Friends Life are at it too – offerring clients annuity deals direct – in my case with Partnership assurance if they might be poorly enough – oh yes and earning themselves an introducers commission from Partnership. Single co tie-up[s are hardly treating customers fairly.

    Who owns Friends – yes aggressive Resolution Group – who happen to also have bought AXA

  12. It’s only illegal to share commission on a pension product with the client, not with an authorised third party.

    That aside, the principal issues that this case raises are firstly that the client may very well be misled into believing that annuitising is his only option and secondly that it demonstrates a blatant lack of respect on the part of both these providers for the relationship between the adviser and the client.

    Why is L&G offering far higher commission to AXA for the same product? All other things being equal, the same product effected via the IFA with lower commission should result in better terms for the client. Isn’t the best deal for the client supposed to be one of the FSA’s primary objectives? And since when was AXA Wealth an intermediary entitled to any commission at all?

    Why doesn’t the FSA ban such practices? One is tempted to suggest that the answer may well be that the FSA is entirely unconcerned about protecting the interests of IFA’s.

  13. You are just starting to see what will happen big time post RDR.

  14. Well said Julian

    One wonders what would happen if you took the enhanced commission deal on offer and then sacrificed all of it for a fee, as it would seem that they are assuming the adviser is giving the advice and so the adviser controls the renumeration with the client.

    Hope someone tries it to see what happens and how much the annuity is improved by.

  15. Whats £18,835.60 between friends.

    This is the plan, get rid of independent advice and we can charge what we like.

    RDR stinks

  16. Any chance of including this sort of information within tools that assess platforms?… the pond seems to be getting smaller and smaller for advisers that seek to protect and serve their clients.

  17. This is what happens when sainthood meets commerciality; the saints generally get trodden underfoot. The FSA don’t appear to bother because they do not understand.
    Have you ever come across an instance in which there was State intervention that did not end up in disaster?

  18. Some of the numbers (which should be derived by simple calculations) contained in these blogs demonstrate why I wouldn’t let the advisers that post them within a million miles of my money….

  19. Following a request for group PMI quote from AXA our client received a cold call from the Leicester office of AXA (direct sales) quoting identical cover and same reference at approx 30% cheaper premium if they go direct! Our consultant however tells us that AXA does not cold call!

  20. It is disappointing that Axa are now focusing on immediate profits over long- term relationships.
    We all have a choice who we use, and if other companies have products as good or better but act with greater integrity, Axa having shown their grubby little cards gives us all a choice, and sadly for them there are plenty of very good brands in the markets they compete in.

  21. I have experienced this, when I asked AXA for the OMO papers for a client. With the papers they sent a quote from L&G, with 2.5% commission, payable to them. Our share, as stated by AXA, would be according to our Agency agreement with L&G. This is 1%, therefore for me to do all the work, AXA will get 1.5%!!!!!!

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