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Cash clash over offshore firms

Life companies that are helping international advisers earn over 10 per cent commission from bond sales are damaging the offshore industry as well as their onshore brands, says a leading offshore adviser.

AES International says Royal Skandia, Friends Provident International and Scottish Life International are all operating remuneration strategies that run counter to their parent companies’ views regarding the current onshore debates about commission and the retail distribution review.

Royal Skandia offers international advisers a 7 per cent standard commission on both its executive investment bond and collective investment bond and an 8 per cent commission on its managed capital account.

Scottish Life International pays 7 per cent initial commission on its international portfolio bond. It says it does offer a nil-rate commission option which it quotes frequently.

Friends Provident International typically pays a standard rate of commission of 6 per cent plus any overrides which have been negotiated with the individual intermediary.

AES International says that these commission payments can be topped up by 3 or 4 per cent, depending on the pro- duct being recommended within the wrapper, leading to double-digit commission.

Royal Skandia says it negotiates deals with international distributors on top of the standard annual 3 per cent commission for its regular-premium contracts but it will not disclose details of “private deals”.

AES International managing director Sam Instone says: “Clients often receive unsuitable funds within unsuitable products with very poor charges, access and terms because the lack of any international compliance, disclosure and TCF distorts the independent financial adv- isory process and any professional product representation.

“Some providers seem happy to turn a blind eye in the interests of short-term distribution but it is very hard to see that the client, provider or intermediary can get any benefit from this practice in the medium to long term.”

Worldwide Financial Planning IFA Nick McBreen says: “The fuse is burning on commission and therefore people in the international and expat arena will clearly be making hay while the sun shines. This is not going to continue and it cannot continue with the ramping up of regulation in all corners of the world.”

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