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Friends Life defends bonds trail commission move


Friends Life insists it was within its rights to cancel trail commission on 800 onshore bonds despite advisers labelling the move as “indefensible”.

Earlier this week, Friends Life confirmed it will no longer pay trail on the Premium Select Bond and Melbourne Life Company Bond, both of which are closed to new business, from October following a change in administrator.

The provider will not rebate the trail back to policyholders and instead plans to “reinvest” the money in its own business. It says it was within its rights to hold on to advisers’ trail commission.

A spokesman says: “Stopping the payment of ongoing commission is permitted under the Friends Life terms of business. It is not a decision we take lightly and we have carefully considered all of the options before reaching this decision.

“The Friends Life terms of business for intermediaries clearly sets out the Friends Life position relating to commission for pre-RDR business.

“This change to commission payments has been made under very specific circumstances due to a change in administration partners. 

“We constantly monitor the market and the shape of our book of business to ensure we are operating in a sustainable way, but can confirm we have not made any changes to the way in which we pay commission in other areas of the business.”

The decision has provoked anger from advisers. Informed Choice managing director Martin Bamford says: “This is indefensible and reflects very badly on Friends Life.

“It flies in the face of everything the regulator has said about treating customers fairly and to say it is too expensive is a very poor excuse.

“As a provider it is Friends Life’s job to administer policies and payments, so the fact they cannot do it properly is a major concern. I would not be surprised if this is the tip of the iceberg and Friends now looks to switch off trail across a wider range of policies.”

Fact & Figures Financial Planners managing director Simon Webster says: “From a business point of view it might not make sense for Friends Life to continue paying trail to advisers on these policies, but to pocket the money themselves shows a real lack of integrity.

“The honourable thing for Friends to do would be to pay the affected advisers a one-off fee to compensate the fact they have taken the trail.”

Webster says Friends could suffer as a result of the damage done to its reputation among advisers.

He says: “The reality is those life offices who treat their suppliers, such as IFAs, with integrity will benefit in the long-term, and those who don’t will reap the whirlwind from advisers.”

A Friends Life spokesman says the money will ”contribute towards the ongoing programme that ensures good customer experience across all areas of the business”.

He adds: “The administration changes are complex and the successful migration of administration services, to provide continued high levels of service to customers, is our priority.”


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

  1. So they support tax avoidance then?

    After all tax avoidance whilst it might not be morally right is legal.

  2. Bonehead Straaton 6th September 2013 at 3:45 pm

    This is the thin edge of the wedge.

    Friends may save £100k but they will lose many £m’s in new business from disgruntled advisers like myself.

    Well done…how to alienate the industry with one swipe.

  3. With ‘Friends’ like you…… Dear oh dear. Taking commission away and not even reducing charges for the customer?

  4. Whilst I do not agree with this action by Friends Life, my copy of the letter received clearly states:

    ‘We will reduce the Yearly Management Charge on your clients’ policies by a level equivalent to the ongoing commission currently being paid’

    On this basis, I have no problems going back to the clients for direct payment of our fees. However it will no longer be a gross, non chargeable event funded from within the plan and have to be paid from the clients net income. It is this material change to the clients benefits and policy terms that I find unacceptable and a breach of the TCF principles. I would welcome a comment from the FCA.

    Are there two versions of the Friends Life letter?

  5. “Stopping the payment of ongoing commission is permitted under the Friends Life terms of business”. But not necessarily under the law. The police should be informed about this theft and criminal proceedings follow…

  6. Well that’s ok then as long as the term that FL can withdraw any services they like at any point they like is CLEARLY stated in their TOB what is the problem?

    Hands up all IFA’s who read every line of the intermediary TOB as they agreed to pass business onto FL or any of the subsiduaries. Bet we will all be checking them now! And when your FL rep comes in to see you make sure you ask for them for a copy of their TOB so you can sit there for an hour or 2 reading through it before you sign up any new business. Or even better get on the phone and ask a member of staff to read them for you!!

  7. It is to be hoped that, as an industry, IFAs make sure Friends Life suffer as a result of their decision. Not just to have an impact on their business, but also pour encourager les autres! We don’t want any other company seeing them get away with it and deciding it’s a great idea! Finally, as a matter of interest, how many customer outcomes under TCF does this breach?!

  8. Friends Life – you clearly do not get the issue here. The inherent product charges would have been higher due to the level of commission taken – remove the commission = a reduced charge, surely.

  9. There must be more than one version of the FL letter – my letter from them says nothing about reducing the yearly management charge. I have a higher rate tax paying widow client of many years now facing paying me a servicing fee (despite this previously being met from the charges in her bond) thereby increasing her costs – it doesn’t seem very client friendly to me, and as for treating customers fairly, can Friends Life really get away with this?

  10. Friends Life Rep……….what decade is that from?

    If an Adviser did this to their clients the FCA would be looking to strike them off, but as always the big companies get away with it. I am sure if you look deeply enough the Directors of Friends Life etc will be in the same ‘Round Table/old boys network as the FCA!!

  11. Interesting stance from the presumably renamed ‘Enemies Life’ who are clearly quite prepared to benefit from a short term gain and a longer term loss.

    I shall of course explain this to all my Enemies Life clients.

  12. definitely no more business from us, not to be trusted

  13. As a client of an IFA with one of the plans in question with over £55k in it, I am quite happy for my IFA to continue to receive trail commission – not because of any ongoing service I might or might not receive, but because when I took out the plan I was given a personal illustration stating that: ‘FOR ARRANGING THE PLAN your financial adviser will receive commission of 3% of the amount invested plus 0.5% of the value of the plan per annum’.

    I was happy with this level of adviser remuneration, with no contractual obligation for him to provide ongoing service and happy with the fact that it would be paid FOR ARRANGING THE PLAN only. Based on the information contained in this illustration and accompanying Key Features Document, I entered into a legally binding contract with Melbourne Life.

    I can find nothing in the policy terms and conditions indicating that the provider may be entitled to turn off the trail commission tap. Therefore whether the terms of business in place between the provider and the IFA at the time of sale says that they can turn off the commission tap or not, my contract with Melbourne Life/Friends Life says that they agree to pay the commission while ever the plan remains in force.

    If my IFA tells me that the trail commission tap has been turned off, Friends Life will be in breach of contract and I will be making a formal complaint to Friends Life, then the Ombudsman, and if that fails I will see them in court if necessary.

    Even if they told me they would reduce my charges by not paying trail commission I would reject such an offer – because where I come from A DEAL IS A DEAL and I won’t ‘do the dirty’ on my financial adviser!

  14. Time I think to invoke adviser power….

    we all know what we have the power to do…
    so its up to us….

  15. To Steve G…Please don’t feel you will need to be alone in your endeavours, just ask MM to flag up your cause if funds are needed and I am sure there are many of us (affected or otherwise) who will chip in towards any legal costs, etc. The sooner such matters are properly clarified for one and for all, the better!

  16. To all IFAs who are caught up in this mess. Agree with your clients that you will now invoice them for your work at a rate equivalent to the old commission and state why you are now being forced to do this. Give your clients 6 months to pay and suggest to your clients that with this invoice they complaint to FL for changing the terms of their relationship with their IFA. So FL get 800 complaints to deal with next month, each client asks for a return of the commission from FL or they agree to pay ongoing IFA fees. If all clients escalate the matter for FOS as well, that should teach them a lesson ! Oh, all IFA should also report FL to the FCA for a breach of TFC principles.

  17. Yep – ‘tip of the iceberg’. No more bus. to FL; disgraceful abuse of client/IFA relationship. C’mon FCA – your silence belies your worth, exposing you as overpaid, lip-serving, pathetic bullies. TFC – what a con!

  18. @ Steve G
    Good man.
    I will never place business with FL again. I will explain to my clients that any dealings with them could end up costing more in the long run, due to the action they have just taken and that any contract with FL is not really worth any more than the stuff in the toilet, so best to avoid them at all costs. Due diligence done.

  19. I wonder what would happen if those advisers affected by the switch off of commission were to issue invoices to ‘Friends’ for the time spent advising clients that would have otherwise been covered by the missing commission. ‘Friends’ might pay it, they might not. If they didn’t, advisers could issue a summons to the small claims court to reclaim the missing fees, explaining to the judge why this has been necessary; ‘Friends’ breach of contract / trust and their pledge to retain the profit from their inappropriate behaviour.

    What I’m also interested in finding out, is how those intermediaries that sit under the ‘Friends’ umbrella (Sesame and to some extent Bankhall members) intend on reacting to this.

  20. florence mccartney 7th September 2013 at 9:24 pm

    Time to vote…with our feet! Enough is enough!

  21. This highlights why reading revised TOB is important then rejecting any offending changes. However it may be argued that changing terms is a breach of unfair contract terms legislation. How the FCA can simply sit back and have Friends profit from this is the real scandal and we have to hope the likes of Jeff Prestridge takes them to task. this is simply the first of the providers to make this move.

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