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Alan Lakey: Providers are leaving advisers high and dry

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Historically, advisers have considered product providers to be their partners – the distribution engine of the product design process; the consensus being that advisers’ and providers’ goals were pretty much aligned and  what hurt one would also hurt the other.

This view was tested during the five-year RDR gestation period when the Association of British Insurers came out in support of the RDR. Aifa later announced its support for the RDR so, on the surface, one could argue that unity of objectives was being continued.

It is now accepted that many providers want it all ways, with distribution from every source – whole-of–market advisers, tied agents, networks, consumer sites and their own direct sales forces. 

Such behaviour is only to be expected in today’s dog-eat-dog world, where yesterday’s partners are today’s sworn enemies.

What is unacceptable is when, like ageing divas enchanted by their foppish new beaux, providers are lining up to discard former partners.

In recent months we have seen Foresters absorb Children’s Mutual, then with undue haste declare to advisers that in customers’ best interests  renewal and trail commission payments would cease and, by way of compensation, a once-only lump sum would be paid. 

These customers are the same clients introduced by advisers to Children’s Mutual or Tunbridge Wells Equitable Friendly Society. Subsequent enquiries have found  the figure payable represents two years’ commission, as calculated by Foresters.

The most deplorable aspect is how Foresters seeks to dress up these antics as some kind of consumer-friendly action. In reality it is circumventing its obligations to advisers while continuing to profit from the fund management and administration of the existing plans. 

Aegon, too, seems to be playing the role of financial buccaneer in trying to gain as many adviser-introduced clients as possible.

The firm’s protests that it is only reacting to policyholder enquiries hold less water than a sieve. 

My own accountant has received separate letters regarding two pension term assurance policies asking if I continue to act as his adviser.

Aegon really needs to consider the impact of its actions.  Why would I contact them about term plans that end within a few years? Unlike investment plans, no aspect of these plans can change and this is clearly a trawling exercise to gain direct customers while alienating advisers.

With friends like these it is easy to see why so many advisers are focusing on platforms or dealing direct. 

Alan Lakey is partner at Highclere Financial Services

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. Agree Alan, but this is / will be the tip of the iceberg ! there will be more who follow suit.

    I think we will start to see (starting with the smaller companies) them thrashing around, like returning salmon in the shallow waters trying to spawn before their last breath.

    They cant compete and more importantly cant afford to compete in this brave new world, weather a persons view on this is good or bad, the writing is on the wall, and dare I say it just like the networks.

  2. The question is. . . in doing this are the insurers breaching a) the agency agreements and/or b) the contracts that arranging these plans for clients thereby represent?

    If I breached a contract I would be sued so I anticipate that Foresters will shortly receive legal documents confirming just that.

  3. “Historically, advisers have considered product providers to be their partners … the consensus being that advisers’ and providers’ goals were pretty much aligned ”

    Surely the whole point of RDR was to change that? Advisers’ and CONSUMERS’ goals should be pretty much aligned, and it’s naive in the extreme to think that providers’ aims are aligned with the customers’. If they were, they’d all be mutuals and charities.

  4. Have to agree with Adam on this one. Sorry Alan the 1980’s are gone. RDR is here and advisers should now be looking after their clients and not the interests of the providers.

    If your clients phone asking why you cant give a valuation from a provider you can of course explain that to do so you would need to be paid and when they say ‘why should i?’ you can of course explain that they have been paying for years but haven’t noticed because it was coming out of commission.

    And i think that if any IFA in the country actually checked the agency agreement they will find that break clauses have been in there forever. Equally as have such nasty things as MVR’s. They only come to be acted upon when they are needed and yet everyone assumes they never will be and blames the insurance company company are! Times change and yet some people dont.

  5. Actually the point is that these are pre-RDR plans where there is a contractual obligation.

    Post RDR is, of course, a different beast

  6. I am not quite in agreement with Alan on this either. A lump sum payment of max 4 years could have been argued against a 2 year and somewhere in between would have been a fair outcome.
    The issue is for my mind with the refusal of the provider to accept that the adviser is the AGENT of the client and not the provider. If they want to, we can send them copies of our client agreements which like many lenders incorporate a general power of attorney to obtain information only until further notice on all financial plans. These haven’t been tested in court yet, but may need to be. They also needed to be tested from a TCF point of view by the FCA as if the provider will no longer treat an adviser as agent for commercial reasons, then they are changing the terms on the client which may mean the client wants out of the contract, but there are unfair barriers to do so.

  7. @Simba -Have you looked at the contracts the insurers issued, they are so in favour of the provider that they will probably be working in the terms of the advisers contract, it is only from the consumers perspective that we have any hope of getting something fair and equitable for all parties sorted. Currently, by the insurer doing this, the consumer WILL loose out.

  8. Do not assert the existence of a contractual obligation without producing a contract. When you do, we can work out whether any such obligation exists and the scope of it. Without the relevant promise in unequivocal terms, the payment of trail becomes nothing more than a nice gesture from provider to adviser.

  9. I totally agree with Alan Lakey and don’t really understand either comment from Adam Smith or Matt. I don’t think Alan is saying that adviser’s and consumer’s goals are not alligned, just because he says that adviser’s and provider’s goals also pretty much were.

    Neither has he suggested that advisers walk around thinking about how they should be looking after whatever provider happens to be on their mind, at the time.

    He seems just to be saying that advisers and providers co-existed in much the same way that a builders merchant does with the builder. The merchant provides the tools and the builder puts them to good use. Only now the builders merchant is trying to cut the builder out and deliver the sand, cement and bricks straight to the householder. The only thing is that they don’t offer advice on how to build the bloody wall.

    Any provider that takes the adviser’s abilty to service away from the client should be able to offer advice to that client. But they aren’t are they? They are just leaving the client high and dry. Is that treating the customer fairly?

  10. The contracts are all there in abundance and there is plenty to discuss – the wording, interpretation, intention of the parties, practice, etc.

    Food for lawyers aplenty but it’s expensive tastes you’re feeding…

  11. Phil, I am not a legal person, but the contract/agreement you/we have between providers and clients are two separate agreements. The first between the providers and ourselves and the second between us and our clients. There are of course further agreements between the clients and the providers directly but none are linked and each will override the other depending on the specific terms of each agreement.

    I do take your point, however at the end of the day the providers have more expensive and more experienced lawyers than you do and they are going to win and the FCA dont give an FCAK!!! Best thing to do is get on with our business and deal with the providers that now provide the best service. Commission is dead long live the fee and there is nothing the provider can do to stop you getting paid if the agreement is place.

  12. How many others will try this on if Foresters get away with it?

    At what point does it become financially non-nviable to wave goodbye to contractually agreed commission payments?

    What impact does it have if these other companies point to the precedence of Foresters getting away with it?

  13. I’m not a legal person, either, but I took The Hartford to the small claims court for payment due to the extra work they caused me because they wouldn’t accept a bankers draft in the format their application specified. They sent a legal person down to the court to defend it but the judge for.d in my favour; so they can be beaten.

  14. Julian Stevens 14th July 2014 at 7:37 pm

    All this started as long ago as April 2001 when providers unilaterally stakeholdered all the PP’s placed with them over the previous two decades. I stopped using them from that point on. I don’t understand why anyone would have continued to place business with such organisations after such a brazen betrayal of trust.

  15. Children’s Mutual was a dedicated child trust provider. It was only when Foresters absorbed them that they turned venal.

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