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Alan Lakey sues Forester Life over axed trail

Highclere Financial Services partner Alan Lakey has begun legal action against Forester Life over its decision to stop paying trail commission.

In April, the insurer confirmed it would stop paying advisers trail commission relating to the Children’s Mutual book of business. Instead, the provider will pay a non-negotiable sum of two years’ commission based on policies remaining in force until either maturity or 30 April 2016, whichever is earlier.

Lakey, who receives around £200 a year in commission from Forester Life, has submitted a claim through the small claims court for £2,150, equivalent to 10 years’ commission. He has been notified by the court that Forester Life intends to defend the claim. It has until the end of the month to file a defence.

Lakey says: “Many advisers will say £200 a year is not worth challenging but that misses the point. If Forester Life sets a precedent, what is to stop a larger provider doing this?

“Forester Life has breached the terms of its contract and should not get away with it.”

A spokeswoman for Forester Life says the insurer cannot comment on ongoing claims but adds: “We believe we have at all times acted fairly towards advisers and in policyholders’ best interests.”


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There are 26 comments at the moment, we would love to hear your opinion too.

  1. Alan usually wins, but this is bigger than that, in fact the whole industry better hope that he wins this one.

  2. According to an article FA 14 August Scottish Widows has said cut off date for initial commission on corporate pensions new and existing will be November and in April 2016 will remove all on going trail

  3. Rt Hon Sir Arthur Streeb-Greebling 22nd August 2014 at 1:56 pm

    I’ll believe most things. I’ll believe that Malaysian Airlines will get you to your destination on time. I’ll believe that Oscar Pistorius will be found guilty. But I won’t believe there is an outfit named ‘Forester Life’. .

  4. Does the client benefit in anyway from the trail commission being stopped?

  5. Contracts can usually be changed if firms give appropriate notice. This is the beginning of the end and all legacy payments should be viewed as under threat.

  6. Another Anon @ 2:02 ” Does the client benefit in any way from the trail commission being stopped ?”
    None whatsoever, and doubtless many clients were unaware of a trail commission or what it entailed !

  7. For what it’s worth (probably not a lot) my take on this is:
    1. This looks like the sale for Friendly Society Bonds – absolute crap. The charges are generally eye watering and the returns abysmal. That is if Forrester is anything like the other Friendly Society bonds that I have examined in the past.
    2. Wasn’t there initial commission? Most of these products paid that as well. If they did then perhaps it is hard to justify the ‘renewal’ anyway. If not – it merely demonstrates why fee charging is superior. Oh – so Friendly Society clients aren’t that well off and won’t pay fees? So why fish in that pool in the first place?
    3. Is it really worth the hassle of taking these people to court? How much time will be expended? One could probably earn more than what’s in prospect by ‘sticking to your knitting’

    Point of principle? Oh dear – not again. We’re not in the principle business are we? Don Quixote rides again. I can understand and completely agree with fighting for something that helps the client – but this? A waste of time and effort.

  8. Incompetent Regulators 22nd August 2014 at 2:50 pm

    Maybe this could be the precedent advisers need against the FSA/FCA who have also changed the rules retrospectively with rebates to platforms and any ‘other’ on going commissions which are being stopped.

  9. Incompetent Regulators 22nd August 2014 at 2:51 pm

    P S If we were all like Harry Katz, the world would be a very much poorer place with the likes of Lakey.

  10. Well done Alan – all success. Foresters’ FS policies are horrendously expensive and guess what – they mainly sell stuff (Only?) now through sales’ staff who are paid – to sell stuff and based on what they sell. (And no Alan, the sale of FS plans did not generate colossal commissions – it was good financial planning and of course ‘most’ of these originated from TWEFS and then The Children’s Society.

    The abuse of mutuality/friendly society status to a captive audience has long been the trend of friendly societies whatever organisation’s members they were designed to (mis)represent.

    PS Scottish Friendly Society’s ‘Friendly Society’ plans are very cheap however!

  11. Incompetent Regulators 22nd August 2014 at 3:11 pm

    PPS re previous post………… Meant to say the world would be a poorer place WITHOUT ALAN LAKEY!!!

  12. I fully agree with Alan Lakey and sincerely hope he wins as any other outcome sets a dangerous precedent for other providers. Somebody should have done this with Paymentshield years ago.

    As for Harry Katz, the attitude of too noble to be paid by the provider, or to deal with the peasantry, speaks for itself.

  13. A spokeswoman for Forester Life says the insurer cannot comment on ongoing claims but adds: “We believe we have at all times acted fairly towards advisers and in policyholders’ best interests.”

    No they haven’t and they aren’t now.

    When they accepted the business from Alan it was on specific terms. Those terms are being ripped up with a take it or leave it no discussion at all, 2 years commission being paid in the hope that the affected advisers will accept without murmur. Alan has every right to challenge this and I say to Harry its time someone stood up and took action because as far as I can see this is just the tip of the iceberg.

    Trail commission

    Additional rules published by the FSA in November 2011 confirm that, in cases where a client bought a retail investment product before the RDR implementation date, the adviser concerned can continue to receive ongoing “trail” commission in relation to his pre-RDR advice until the product matures or is terminated.

    They should leave anything already in place to run its course and their rules around commission should only effect new business.

  14. Remuneration for advice should have always been between the adviser and client, as soon as third parties are involved issues like this can arise.

    Can Alan not charge the client directly for any ongoing service post 2016?

  15. Plucky little blighter is our Alan. For years now, all sorts of other life companies have been unilaterally shafting their once-supporting intermediaries by removing or dramatically reducing the levels of commission on which they were more than happy to encourage business to be placed with them. The worst example is the unilateral stakeholdering of all PP’s written over the 10+ years preceding 6th April 2001, the bastards. Amongst the very worst were Standard Life ~ they did it on group PP’s as well. But all the other trad life offices were just about as bad. And they wonder why they get a hard time when they come knocking on our doors trying to get more.

    I hope you succeed Alan and set a precedent.

  16. I’m bemused by some of the comment. Yet again it seems that some advisers think they are social workers. For heaven’s sake we are in business – are we not? Will the BMW garage try to sell you a Dacia if you can’t afford a BM?

    If you want to be a Dacia agent then that’s your lookout. It doesn’t make the BMW garage a pariah.

  17. @matthew

    Sorry, I may be stupid here but……the suggestion is that the client continues to pay Forester FS on their current scale of charges (which includes a provision for paying Alan trail) and then the customer pays Alan as well? So Forester FS pocket that money and the client pays it instead.

    People seem to miss the point i.e. if you make a long-term commitment to pay a distributor, then you should meet that commitment rather than trying to get out of it. No-one should not make a legally binding commitment if they are not willing to abide by it. Simples.

  18. Harry what are you smoking?

    This has got nothing to do with cars, BMW’s or Dacia’s. Or, social workers for that matter.

    Make sense man.

  19. 3% plus 0.5% ongoing was the alternative to 5% up front, so a justifiable figure would appear to be a 2% buy out on current value. rather than 2 years of the ongoing commission.
    I can understand any provider wanting to buy out small sums of trail with a lump sum and when Lincoln did the same I was quite pleased as it meant I didn’t have to monitor the small sums coming in anymore.
    I can see why Alan wants to stand on principle as it may be used to set a precedent by larger providers, but I can also see Harry’s point about being pragmatic about it and the sum involved. Not really enough money to make the argument worth the effort for either party, so either party might choose to back down at an early stage to save wasting time, effort and money.
    Therefore I wish Alan luck as he is justified to stand on his principles, but this is not a battle I would have bothered with as I can only fit in so many battles and you have to be selective with use of resources or you will not win a war.

  20. @Jinker

    Sorry if I have expressed myself poorly.

    What I tried to get across is that from what I have read here and elsewhere it seems that there are those who think it is incumbent upon us to find solutions for the less (if not the least) well off in our society and the underprivileged masses and in so doing introduce them to less than ideal solutions and products, when doubles in most cases they would have been best advised to reduce debt, reduce spending (if at all possible) and build a cash reserve of some sort – but then there’s no commission in that is there?

    I had always thought that in the last analysis we are all in business and the purpose of being in business is to make a profit as a result of having happy and satisfied customers. (Or what we are pleased to call clients). It is the customers who pay us – not the product providers. Permitting the latter is the path to grief – as this article demonstrates.

    The car analogy was an attempt to show a simple truth – the BMW dealer makes a better living than the guy who has a Dacia franchise. But in both cases they are paid by the customer – not the manufacturer. I think the main problem stems from the fact that so many in this business have never been anywhere else, or if they have; started their time in FS like most of us – in a life office or in direct sales and swallowed the brainwashing and never have been able to see though it or shake it off since. In the main that is what the RDR was designed to do – break the link between provider and adviser. We have seen it coming for more than 6 years; we should all have been able to adjust by now. It’s time to let go.

  21. @Harry – i think you have missed the point.

    Alan clearly decided that he could service the “Dacia’s” of this world because his income was going to be supplemented by the manufacturer. The issue is that the manufacturer has decided, without warning, to stop that payment. Alan is simply disputing their ability to do this. To suggest that he shouldn’t “fish in this pond” is a little sanctimonious.

    We all know that universal contracts (such as a companies terms & conditions) can be argued either way by a lawyer. Let’s hope that Alan wins this particular battle but i suspect the war is going to be fought for a long time yet.

  22. In car terms, that simply isn’t the case, Harry. Someone who sells ten Dacias is likely to make more money than the dealer selling one BMW.

    Some sales people (!) want to make their money in big chunks, others from volume and, in some cases (believe it or not) there are those who are not only in business to make money but who feel it is their social responsibility to provide advice to other than those who are already rich and can afford to pay upfront for their investments or pensions to be arranged.

    So no, we don’t all want to be BMW salesmen and, personally, I dislike BMW drivers on the whole as their attitude to other road users and to road traffic laws is often disdainful and superior. Just my take on it, but perhaps there should be allowances made for different business and distribution models.

    As someone who started in this business as an industrial branch collector/seller, there were many who would not have saved at all, or provided for basic protection, if I had not knocked on their door on payday to collect their premiums.

    With respect, you should not pontificate based on the assumption that only the wealthy want or need advice.

  23. @Stuart Duncan

    I’m well aware that not only the wealthy want or need advice – but the truth is that they can afford to pay for it and charging a fee is always preferable to relying on a third party.

    Oh, and your response concerning Dacia is way out – look at the figures. BMW outsell them by around 4.5 times. Dacia Group total sales 2013 = 430,000. BMW Group Total Sales 1,963,798.

    But I do see your point – it’s the Tesco principle – Pile it high and sell it cheap. But to succeed with this you do need (as you have pointed out) a much bigger throughput – and can small firms succeed in that? I doubt it – that is mainly the bank model. I really can’t see the small adviser business making a go of this – and providing a good deal for the customer. I would again remind you to look at the charges (as well as the indifferent performance) of these type of products.

    (As a devout petrol head I make no apology for harping on about cars)

  24. Manufacturers do provide financial subsidies to dealers based on hitting certain targets! Every car has a “base” price than the dealer will be “invoiced” for. The manufacturer will allow a discount from that price for volume and/or meeting of targets or the selling of the manufacturers finance for the deal to purchase etc. For example Ford may say to the dealer, the price for a Mondeo is £20,000 for the first 50. Discounted 5% for the next 50. Discounted 10% for the next 50 and so on. Thus the more a dealer sells then he is making greater profits. A dealer may wish to discount the cars at his own expense to customers with a view to making it back down the line when he has sold the requisite number of units/finance/extended warranties/service packages etc.

    Manufacturers can remove the franchise from a dealer for a number of reasons and then they wouldn’t be selling any.

    A BMW dealer is likely to have higher overheads than a Dacia dealer, but bottom line is what counts not how many you have sold!

    In the advisory world i’m a great believer in quality over quantity. However, each to their own.

    As for life companies, those that think they can sh@ft me or my clients no longer receive new business. That’s most of them these days!

  25. But they managed that without funding a dealer network (they use the Renault dealership network) and I would suggest that there are many more dealers fighting for BMW sales than for Dacia sales, so the 10:1 ratio may not be too far out….the Dacia Duster looks ok as it happens 🙂

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