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IFAs have least policy lapses

IFAs have topped the FSA&#39s persistency tables for the seventh year running, proving yet again that they provide more suitable advice than direct-selling rivals.

According to the FSA&#39s data for 2001, clients advised by IFAs had fewer policy lapses across almost all areas of life and pension products, with the exception of single-premium pension plans.

The FSA says this is because IFAs tend to sell more suitable products to wealthier clients compared with direct salesforces.

Contribution rates after four years averaged 73 per cent for products sold through direct salesforces and 79 per cent for products sold via IFAs.

Regular-premium pensions suffered the worst persistency rates at 57.2 per cent and 60.7 per cent respectively.

The regulator says this was due to the so-called “pension blight” before the introduction of stakeholder in April 2001, with many investors taking pension holidays.

Direct salesforce persistency was only better for single-premium pensions, with 93 per cent of schemes sold remaining on the books for four years compared with 90.7 per cent of schemes sold by IFAs. But these figures relate to transfers rather than continued contributions.

Rickman Tooze financial adviser John Haynsworth says: “We, as IFAs, set great store in ensuring any investment products we sell are affordable for clients to prevent policies lapsing in the early years. I am not sure direct salesforces look at affordability nearly so much.”

Scottish Life head of communications Alasdair Buchanan says: “Generally, the IFA market is more upmarket in socio-economic terms, so one would expect their clients to continue to be able to make contributions.”

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