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Friends slams “buy now while stocks last” commission tactics

Friends Provident has hit out at rival life companies who are offering “buy now while stocks last” commission incentives on group pension schemes ahead of the retail distribution review.

Friends Provident director of UK corporate James Ward says he “would not want to be a shareholder” in one of those companies as he does not believe that offering such high commission rates provides long term value to the business.

Friends Provident today reported a 26 per cent drop in group pensions sales, down to £310m over 2009 from £423m the previous year.

Ward says: “Our chief financial officer has described it as a ’buy-now-while-stocks-last’ effect. We know that with the retail distribution review coming in 2012-13 that commission in this market is going to end and we celebrate that.

“We do not believe it is a sustainable business model for anybody and that is why we pulled out of that market in 2008. There are at least three big players still paying high rates of unfunded initial commission and the FSA made clear in its consultation paper, that if you look at market share the companies that have moved forward are those ones that are paying high commission, so they are buying business.

“But, I have to say I would not want to be a shareholder in one of those businesses as I don’t believe they are getting good returns on it.”

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Incompetent Regulators Awards Team 11th February 2010 at 1:22 pm

    Who would want to invest in Friends? Just look at the way they handled their With Profits fund. Even my grandmother with dementia could do obtain better returns!

    Friends has always been complicit with FSA rules and ideas because they have none of their own. For a compnay that built itself on the back of commission sales they seem to be very short sighted. Or maybe caught the F-Pack disease, just destroy everything that’s good in it’s path.

  2. FP were in when they should have been out and are now out when they should be in. Madness

  3. Commission levels today are nothing like they were in 2001, when with all that highly paid actuarial brain power you all stated that you could adopt the 1% contract and pay the IFA commission resulting in all parties being happy.

    Because it isn’t sustainable, you want to take your ball home, implement…. sorry, support the RDR, exterminate the IFA and set up your own direct sales forces..

    Mmm.. FP…… Resolution…. all those poor blo*dy endowment policy holders… misold.? ..morelike mismanaged.. where’s their compensation..

  4. It’d be rude not to take the commission then !
    Do FP not think the takeover by Phoenix might have something to do with no new business ?

  5. Terrible IFAs behaving like businessmen, whatever next!

  6. He’s a fine one to talk about shareholder value I remeber FP shares over £2.25 look where they are now under Resolution

  7. No company that has allowed itself to be suckered into the commercial suicide of stakeholder pensions and which has alienated most of its once supporting IFA base is in a position to throw stones about what other companies are doing that may impact on the interests of their shareholders.

  8. Ah, I remember Friends Provident a good example of traditional life office without a place in the modern world and what happens when you jump up and down to the regulators tune and believe in prducts without profit.

  9. I must admit that the returns on their WP policies are eye-wateringly poor. And that was before the credit crisis, one wonders what other levels of incompetence are lurking beneath. I have met several of their key management over the years, and all have been staggeringly mediocre (being polite about it).

  10. Most ironic considering FP brought themselves dow when they tried to steal a march on the competition by jumping into the market with the 1% monocharge before the govt had even decided on the appropriate level, thereby helping to convince Frank Field that the market could cope at 1% rather than 1.5% which he was considering. Do as we say, not as we do….?

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