Like many of my peers, I welcome the initiative to create industry standard agency agreements between product providers and IFAs. However, even before talks have begun, there seems to be some disparity between the objectives of Aifa and the ABI.
On one hand, Aifa is calling for a one size fits all agreement whereas on the other, the ABI is suggesting a basic template upon which more customised agreements can be built.
My preference is for a single agreement, if only to save on paperwork. The frequency with which some companies change their terms and conditions is alarming. But another reason for welcoming an industry standard agreement is that IFAs would be far more likely to read through the terms and conditions before signing.
I am sure there would be far less likelihood of something like the following little chestnut, from a company which shall remain nameless, slipping through the net:
“The company will be entitled to use, and the intermediary consents to the company's use of any information or data supplied by the intermediary to the company for the purpose of exchanging information with any other contracting parties of the company, conducting market research (either alone or in conjunction with any other party), for preparing strategic or other marketing plans (either alone or in conjunction with any other party) and furthermore the company shall be entitled to disclose and the intermediary approves the company's disclosure of any information or data supplied by the intermediary to the company to any party contracting with the company or otherwise to any party as is consistent with the effecting of the afore-ment-ioned approved uses of such information.”
Is it just me or does that sound suspiciously like giving carte blanche to indiscriminate mailing of clients by a third party? Whatever the company was implying by this legal speak, I do not think it is something I want to see on a standard agency agreement.
Which brings me on to a few things I would like to see.
Plain English would be nice, as the above example demonstrates. A standardised procedure for dealing with complaints and compensation would also be refreshing but, I fear, highly unlikely.
However, top of my (and I suspect many other's) wish list is obtaining an industry consensus on the treatment of renewal commission. The vast majority of the industry views renewal commission as payment for ongoing servicing of business. However, a few notable exceptions see things differently and continue to pay trail commission to the original intermediary even after the client has appointed another IFA.
The full extent of this practice was brought into sharp focus during a recent restructuring which involved some agency changes. What, on the face of it, seemed a simple exercise was turned into a drama of epic proportions by some well known, highly respected companies.
Even though our written request was self-explanatory (that is, most got it right first time), there were those who failed to grasp what it was that we wanted – a case of “if it doesn't fit in the box it doesn't exist”. One organisation which shall remain nameless suggested we ask the original introducer to agree in writing to give up their entitlement to renewal commission in our favour – my hysterical laughter was lost on them.
Fortunately, we were the original introducers, so we duly sent off our permission giving up our entitlement to trail commission in favour of ourselves.
My recent masochistic adv-entures in commission department land reminded me just how little some companies have invested in this area. Considering IFAs account for around 60 per cent of total new business, isn't it about time that the service from commission departments reflected this? I can but dream.
There have been calls for standard levels of commission. Personally, I would welcome this move. However, I am not sure how the Office of Fair Trading would view it. Standard commission terms have existed before in the shape of the maximum commission agreement. Its demise came about after the OFT declared that it constituted a cartel, was anti-competitive and that its removal would push commission rates down. We all know what happened next. Perhaps the OFT might react differently this time round if any agreement on commission levels were reached.
Whatever Aifa and the ABI come up with, my one hope is that it is comprehensive, workable, gets full approval from both IFAs and product providers, and, perhaps most importantly for those of us pushed for time and storage space, has a decent shelf life.
Donna Bradshaw is marketing director of Fiona Price & Partners
SRCE: Money Marketing
HDLN: Is anybody listening to the warnings on stakeholder?
The ABI's director general Mary Francis has told the Government, in no uncertain terms, to stay out of financial product design.
Francis employed a shrewd strategy, saying lessons should be learnt from theIsa confusion and applied to stakeholder pensions and individual pension accounts.
Her case is strengthened by the fact the Inland Revenue is now grappling with the problem of investors who have unwittingly taken out more than one Isa. Francis also offered the ABI's own standards initiativeas proof the industry was putting its own house in order.
She chose to make her comments when the Government appeared at its weakest, under pressure over fuel tax, the state pension and the Millennium Dome debacle.
Even the Prime Minister himself was forced to make something of an apologyfor not listening. But while the Government may be contrite about other failings, we do not expect it to pay attention to the industry.
As more providers sign up for stakeholder, with Standard Life the latest, ministersare already saying 'I told you so' aboutthe 1 per cent charging structure.
Money Marketing remains sceptical about whether the new pension can succeed.It risks tens of thousands of financialservices jobs and may fail to deliverbecause no one has an incentive to sell it.
The bigger providers that try to compete will eventually have to face the wrath of policyholders or shareholders as they take the strain of unprofitable business.
It could lead to unprecedented pension blight but Money Marketing fears that despitenew-style listening Government. Francis's warning will fall on deaf ears.