Chris Gilchrist: Zombies win, clients and advisers lose


The vast majority of extant UK life and pension policies are now administered by zombies and the way financial engineering has asset-stripped both mutual and listed life companies has created new hazards.

The FCA claims a consumer focus, but in its row-back from the Telegraph’s interpretation of an FCA thematic review that could decimate lifeco profits, its boss admitted that if the old contracts were clear and fair at the time of issue, they cannot be overturned.

If it were not for the way the FSA sometimes changed its rules to have an effectively retrospective effect, we might take the FCA at face value. I am sure few people will do so today and will suspect that the review could seek to enforce elements of current rules by the back door.

This completely misses the point about the zombies. Yes, many old contracts were shockingly bad value by today’s standards. But hang on a minute. When those 1980s contracts were issued, I was hard-pressed to find a decent men’s suit for under £300. I can pay less than that today for a better suit, so in real terms today’s cost is a third of what it was.

Improvements in technology have radically lowered the costs of creating and managing many products and those savings have been passed on. This is how markets work. I cannot trade in my 1980s suit for today’s model and nor can the 1980s pension plan policyholder.

Some may object that a major reason for the bad value was the commission built into the old product but that paid for the advice and to compare today’s much lower contract costs while ignoring the cost of advice, now charged separately,  is economically illiterate.

Do the sums and you will find that for small monthly savings, an old-style contract with ‘initial units’ embodying extra annual charges will deliver better value if run to maturity than a lower-charge contract with an advice fee, if you also assume you can invest that advice fee on the same terms.

But the real issue of the zombies is not the contract charges but the standards of service. It is fair to say that at all the firms that have been taken over and are now penned in cages in zombie warehouses, standards of service both to clients and advisers have declined.

At my own firm, administrators at Friends Life recently returned a Letter of Authority enquiring about several old policies after passing it through four departments. On it was scrawled “No trace found”. In an hour of telephone calls the adviser went through two other departments and was then told a new computer system enabled the staff to say the policies did exist but that they had no way of finding out where they were or providing information about them.

I don’t think this is untypical. Many advisers will confirm the abysmal level of service provided by the zombies. Clients and advisers are incurring huge time and hassle costs while the zombies sit back and make easy profits from a nil-service proposition. I hope the FCA review will focus on this important issue.

Chris Gilchrist is director of Fiveways Financial Planning, a contributing author to Taxbriefs Advantage and edits The IRS Report


Financial advice-planning-advice-cashflow-analysis

Better Business: The importance of business planning

Many people argue that spending time on three year business planning is pointless when there is major change and uncertainty. Others suggest this is exactly the right time because it reduces risk and demonstrates effective management. The planning process has many advantages and provides: business direction opportunity for discussion of exit and succession options opportunity […]


Transact profits up 14% to £16.9m

Transact has announced pre-tax profits of £16.9m for the year to 30 September 2013 as assets under administration grew to £14.3bn. The platform’s profits are up 14 per cent from £14.7m the previous year. Over the year, AUA grew by 20 per cent from £12bn to £14.3bn, partly due to growth in financial markets. Administrative expenses rose […]

CPD: Financial services regulation and ethics

The latest edition of Newsbrief counts as 1 hour of structured CPD and covers the regulatory and marketplace changes which took place during March 2014. Visit the Money Marketing CPD Centre to answer 10 multiple choice questions and complete this CPD activity. Just click into your CPD Plan and you’ll find each month’s marketplace changes round-up in your activity list.

Martin Wheatley 2 2013 700x450

FCA ignored Bank warnings on closed book probe

The FCA ignored warnings from the Bank of England about the impact on the market following its closed book probe briefing that sent insurers’ share prices plummeting. Ahead of its business plan last week, the FCA briefed the Daily Telegraph about a review it was to carry out into closed book policies and the fair […]


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. Well said Chris, I agree entirely and with the name of one of the WORST offenders “Friends Life” and in particular their ex AXA policies.
    The clients paid throuigh their policies ofr an ongoing admin service which is no lomnger being provided AND they paid for intended advice (via commission) on their annuity contracts which is NOT being paid, nor being rebated to their contracts.

  2. Well written Chris, you hit the nail right on the head as ever! Dick Carne

  3. We too had this with Friends Life. We did a consolidation exercise as a client had lots of little pension policies including two with Friends Life. We passed on all the information but were told only one of the plans was in force.

    We completed the consolidation exercise and 2 years later Friends Life sent the client a valuation update on the plan they had said didn’t exist. When we put in a complaint they said it wasn’t their fault as the client had missed off the first zero of the policy number and despite having found the other policy, having his correct address, date of birth and national insurance policy they hadn’t been able to link the two policies together!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm