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How life offices plan to deal with direct clients

MM takes a look at the direct strategies being employed by the big providers as we approach the RDR (full table at bottom of the article).

Insurers have to consider how to serve the needs of their direct customers but concerns remain about the agenda behind some direct models.

As the RDR deadline draws nearer, providers will have to ensure they have a cost-effective model not only to continue to support these direct clients but also any orphan clients whose advisers leave the industry next year.

Over recent months, details have begun to emerge about the kind of models that insurers are looking at for their direct clients.

Last month, Prudential rolled out its financial planning service to offer face-to-face advice for existing direct customers close to retirement.2

It aims to grow from 20 field-based staff to 80 over the next year. It will target customers who came to the Pru through its direct sales-force, which was axed in February 2001 to focus on phone, online and workplace customer service.

In September, Money Marketing revealed that Friends Life had set up a phone and web-based financial planning service called PlanWise to help existing customers manage their Friends Life products. The company says this is aimed at orphan clients and existing direct customers and supported by seven regulated advisers.

Zurich runs a phone-based customer options team, made up of 35 staff who provide product information to customers who are considering surrendering their policy or who are unsure about the products they hold.

Zurich UK Life principal of government and industry affairs Matthew Connell says there are no plans to expand this service into a face-to-face or online offering after the RDR.

He says: “The service is often about talking to customers about the questions they have about their products but were too afraid to ask or making people aware of options or features they had forgotten about or were not aware of. We find that kind of prompting, as information rather than advice, is easier and more effectively done by phone.”

Zurich’s online developments are centered on its corporate platform, including consumer online tools such as budget planners that can be used on smart- phones, and its retail platform which is expected to launch in the first quarter of this year.

LV= is carrying out research with the public to assess what model will be most suitable to look after its direct customers. It has ruled out a face-to-face advice service.

Scottish Widows has a direct salesforce of around 50 people to deal with orphan clients in addition to a phone-based support team of around 20 people.

Aviva has a direct salesforce of around 65 people offering face-to-face advice. It also has a telephone support team, which is linked to an online WebChat facility. It also plans to expand its workplace advice services.

Standard Life has a client management team to provide support to direct clients with 85 staff, 18 of whom are regulated. It has also developed a consumer online education hub. In 2010, the company said it would not look to increase its direct business above 10 per cent over five years.

Legal & General declined to comment on its plans.

Insurers are keen to stress that any direct model they adopt will complement, rather than compete against, IFA distribution.

Deloitte lead RDR partner Andrew Power says insurers will increasingly look to cater to the mass market to plug the advice gap following the RDR. He believes face-to-face advice will ultimately prove more expensive and time-consuming for insurers to provide and most will look at offering online tools and information through the workplace.

Power says there is already a perception among advisers that insurers are poaching clients when they announce a move into the direct sector or reveal plans to look after orphan policyholders.

He says: “You will find that IFAs cannot in their existing business profitably serve that mass market. They will only be able to serve the mass affluent market.”

Aifa policy director Chris Hannant says advisers should not feel threatened by insurers’ dealings in the direct market, nor should they fear that clients will choose insurers over the service provided by their adviser.

He says: “If the RDR is about selling advice rather than selling products, then just because a provider has a relationship with the client, that does not remove the need for advice. Even if we see the re- emergence of the tied salesforce in a big way, there will still be a need for independent advice.”

Hannant cites the example of lenders offering direct mortgage rates. Better rates may be available on the high street rather than a mortgage broker but consumers still opt to use a broker because they like someone else to do the shopping around for them.

But he warns insurers will need to be careful about how they market any direct model, both to advisers and consumers.

He says: “If an adviser thinks an insurer is trying to poach their clients, they are not going to be inclined to recommend their products.”

Essential IFA managing director Peter Herd believes independent advice will always trump tied advice, regardless of format but he is concerned by some direct strategies he has seen so far, particularly Standard Life’s letter to clients last year that offered them an iPad 2 to fill out a summary of their personal details. The letter also gave clients a box to tick to remove their adviser.

He says: “Is the regulator going to crack down on insurers doing that kind of thing? There should be an FSA standard for how insurers deal with advisers and our clients.”

Power says the impact of the RDR and the shift among insurers to provide guidance rather than advice, has been underestimated.
He says: “We are heading towards a fundamental change, particularly in the mass market, more than I think people have realised, and more than the regulator has realised.”

Insurers’ strategies for direct customers


Pru is rolling out its financial planning service to offer face-to-face advice for existing direct customers close to retirement. It aims to grow the direct salesforce from 20 to 80 over the next year.

Friends Life
Friends’ PlanWise service was rolled out last year. The phone and web-based financial planning service is targeted at orphan clients and existing direct customers and is supported by seven regulated advisers and six call-centre staff.

Zurich operates a customer options team which provides phone-based customer support. It is also developing online tools through its corporate platform and plans to launch a retail platform in the first quarter this year.

LV= is carrying out consumer research ahead of introducing a direct client strategy. It has ruled out offering face-to-face advice.

Scottish Widows
Widows has a direct salesforce comprising around 50 people and a phone-based support team of around 20 people.

Aviva has a fully qualified direct salesforce of around 65 people giving face-to-face advice. It has a telephone service offering advice and non-advised services, and also has an online WebChat facility linked to the telephone team.

Standard Life
Standard Life has a client management team to provide support to direct clients. However, it was unable to supply figures for the numbers of direct staff. It has also developed a consumer online education hub. In 2010, the provider said it would not look to increase its direct business above 10 per cent over five years.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. One thing is certain with all these life offices gearing up for direct sales it just goes to prove the RDR is being brought in for their benefit nt the consumer. Poor averageman in street will be stuck with second rate advice and poor products. Good old FSA you really have improved the avice process for Mr /Mrs average

  2. These companies are doing what they have to do to survive. As we have started to put in place a fee service we have found that there is a lot of advice work to be done that we ignored before because it didn’t result in a product sale. This is good business but won’t help the likes of the Pru or Zurich.

    Also I can’t see many IFA’s using these firms in the future. Those that can afford to will use wraps and DFMs. The days of IFA’s recommending the PruBond and Aviva Portfolio are over.

  3. Sorry…I meant to add…well done FSA. Whilst we will do nicely out of your RDR and you guys will no doubt continue to draw your excessive salaries, the general public will lose access to good advice and thousands of jobs will go at the companies listed above.

    RDR = great for the FSA/FCA
    great for some IFA’s
    Bad for other, usually older IFA’s (who generally provide great advice and service)
    Bad for insurers
    Bad for the staff of insurers
    Bad for the economy as investment amounts will fall.

  4. Interesting that they didn’t ask Axa (or Axa didn’t say anything)…


  5. Yes, If the fsa knew their history they should have realised that this is right back to the bad old days of big companies mis-selling products (that is what happens with big companies because they cannot control the salespeople and their immediate managers). Dumber and dumber.
    Good old FSA. Another own goal for the public.

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