As an intermediary, I:
- Find the clients. l Do a fact-find.
- Source a suitable product. l Do the application.
- Chase up the case.
- Do the compliance.
What does the insurance company pay me for doing all this work for it? Bugger all/ Sweet Fanny Adams/nothing (take your pick).
Before someone jumps down my throat, let me explain. They do not actually pay me for my work and my up-front costs so I can make a living – they only pay me on an indemnity or non-indemnity basis an amount of money I may or may not get depending on whether the policy stays on the books for, say, four years.
I cannot live on fresh air but policies do drop off, normally because a marriage or partnership breaks down – sad but that is today’s world and the first things that get stopped are the insurance policies.
We need a fairer remuneration scheme that will encourage advisers to concentrate more on satisfying people’s needs for life cover while getting a fair payment for business placed. The current system suits nobody. Getting it all up-front on an indemnity basis may be attractive but the pain if it drops off is excruciating.
Payment on a non-indemnity dripfeed every month is like watching paint dry and does not compensate for your up-front costs.
I would rather get a lesser amount that is mine for keeps and pays my up-front costs and then get a suitable trail of initial commission. Let me suggest one-third of the fee, non-refundable, and then the rest after nine months on a monthly drip until month 24.
Mr & Mrs Average need sound financial advice on life cover and I can see nothing in the RDR that addresses this, only different ways of remuneration and classes of advisers that it is unlikely that the public will ever understand. After all, the public think they know what independent is but the FSA has rewritten the English dictionary so that it means something else.
Are the providers and the FSA, in particular, not in touch with real people? Are they just talking to themselves without addressing the “practical” needs out there for good advice, where customers are not obliged to pay fees, which they are unwilling to do?
Above all, are the advisers in the industry to become even more soul destroyed by the constant tinkering by the FSA?
Advisers are generally hard working, honest people who want to treat customers fairly and it is about time that this was truly recognised by the FSA.
Additionally, insurance providers should recognise the needs of advisers to pay their bills and make a living selling life insurance products by paying them fairly. This means more up-front payments that are non-refundable for the work they do.
Danny Lovey is sole practitioner at The Mortgage Practitioner