IFAs may be finding themselves victims of a double whammy. Not only are product providers reducing levels of commission dramatically to cope with the 1 per cent environment, they are increasing the costs to IFAs massively through totally inadequate administration. To call it an administration “service” is a complete misnomer.
I recently estimated that as much as one-third of the time spent by personnel at my firm is used to rectify mistakes made by product providers. No one is perfect, we all make mistakes – yes, even IFAs – but what really matters is the way mistakes are dealt with once identified.
A new culture seems to have developed among the admin staff of product providers. You might call it the “I know nothing” culture. Possibly I am wrong here – it may be the “I don't care” culture.
It is almost impossible to speak to the same person twice in some of these organisations. If you are lucky enough to do so, the chances are that you will be talking to someone working in a call centre whose job strangely is only to take your call. They cannot actually do anything about the issue you are calling about as their job is to pass on messages. They may not even be in the same building as the person dealing with your enquiry.
In the most extreme cases, they may not even be able to talk to the person dealing with your enquiry. Their contact may only be by memo or email. When they do eventually make contact, they may then come back to you with the standard response of: “We have a 15-day turn-round time.”
I am not sure why it is always 15 days – I imagine it is in the hope that the problem will simply go away. Eventually, you will have to make an official complaint and you will then receive a standard letter explaining that your complaint will be investigated. You will, of course, never hear anything again if you do not persist. If you are lucky, you will get an apology but no real explanation of what the problem is.
Meanwhile, the service you provide to your client will have deteriorated significantly. In addition, any profit you had hoped to make will be eroded, hence the double whammy – increased costs, lower revenue.
Worst culprit at the moment is the investment side of Norwich Union. It is atrocious. I appreciate that the CGU/NU merger probably created some problems for it but why should the IFA and the customer suffer? Frankly, Norwich Union should have done the decent thing and closed for new business while it was unable to cope with it but that would be too much to expect ,wouldn't it?
The top 10 administration errors experienced by my firm are:
Claims of: “The client is not under your agency” when it is and we have evidence that it is.
Inaccurate illustrations. For example, we ask for a net single-contribution personal pension plan quote but what we get is gross.
Failure to change a direct debit collection. Yes, this is still happening.
Inaccurate commission payments.
Slow or non-production of contribution or allocation histories.
Inaccurate policy documentation.
Failure to return calls when the administrator said they would.
Issuing of renewal documentation dated after the renewal date.
Sending post to the address from which we have not traded for four years.
Claims of: “It is in the post to you.” As bad as the post can be, it does not normally take two weeks to arrive.
The lowering of administration standards is as equally onerous to the IFA as the lowering of commission levels. It is a hidden cost and is a significant reduction to the profits that IFA practices might expect. It is also very difficult to price in, in that additional costs incurred by poor provider administration is not easy, nor desirable, to pass on to the client.
I would be delighted to hear of other IFA top 10s and what product providers are actually doing to improve the situation.
Nick Bamford is managing director of Informed Choice