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Friends Life to cut charges for 100 bond investors following trail move

Friends Life will reduce the yearly management charge for 100 investors in its Melbourne Life Company Bond following its decision to stop paying trail commission on the product.

Last 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 the 700 Premium Select Bond investors and instead plans to “reinvest” the money in its own business.

However, the 100 people with money invested in the MLC Bond will see their yearly management charged reduced to reflect the removal of 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.

“For the large part, as a result of commission no longer being paid on these bonds, the money will be re-invested into the business and will contribute towards the ongoing programme that ensures improved customer experience – for example making improvements to customer communication material and speeding up resolution of customer queries.

“However, on the smaller number of 100 MLC Bonds, the policies are set up in a way that the yearly management charge changes to reflect the fact that the trail commission is no longer being paid.

“Customers that have an MLC Bond will therefore see their YMC reduce in line with the amount of trail commission currently being paid. The Premium Select Bonds are structured differently and changes to systems required to alter the YMC are not commercially viable for the business.”

The decision to stop paying trail has provoked anger from advisers, with Informed Choice managing director Martin Bamford branding the move “indefensible”.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Too little – too late…

  2. Dinosaurs are extinct and Friends Life decision to stop paying trail commission has assigned this company to fossils history. They no longer care about distribution because their proposition is so poor.

    When these bonds were take out the adviser had a choice of higher initial or lower initial plus trail. These products were placed on this basis and this unilateral act amounts to a moral breach of contact. If you look at the product there are plenty of “best advice” reasons to bin and switch. TCF demands this.

  3. But by how much. If trail was 0.5% are they rebating the full amount?

  4. We are all going to boycott Friends Life, now lets see their share price plummets.

    Power to the IFA!

  5. 1. Were these Terms of Business AT THE TIME clear that trail commission could be turned off? Or was that only inserted in much latest editions, long after the business was introduced, applied for and accepted?

    2. Given the answer to the first question, are the Terms of Business legal, or does their contract fail the law’s test of “fairness”?

    Only a court case can decide.

  6. “However, the 100 people with money invested in the MLC Bond will see their yearly management charged reduced to reflect the removal of trail commission”…

    So the customers will be rebated in full?

    Secondly, Friends life stated it was pulling the trail payments because they said it wasn’t feasible or cost effective to build this functionality into their new system, yet they are now able to ad-hoc adjust 100+ policies with varying levels of trail fees because, and rightly so, of the IFA community & client reaction.

    Disgrace.

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