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Nic Cicutti: British Airways and the trail commission debate

Bear with me for a second or two while I tell you why I intend to fly British Airways at every opportunity I get and why the increasingly bizarre debate over trail commission after the RDR is starting to wind me up.

The story starts with me booking two flights to Rome at the end of last year, where my wife-to-be and myself were heading to get married.

I had obtained quotes from the usual suspects, Ryanair and easyJet but as I proceeded through their online systems and more and more hidden charges were piled on, what had looked like £65 return flight turned into something approaching £115 per person.

It wasn’t so much the high cost of the quotes that made me contact BA – easyJet and Ryanair’s flights were still pretty cheap – but the sneaky way that fees were being added at every turn. To my amazement, BA came in with a quote of £140 each, more expensive but not massively so. Strike one to BA.

Strike two came at the departure gate and on the flight. As we waited to board, BA offered passengers a selection of free magazines and newspapers. On the flight, we were presented with a complimentary drink and nibbles. Imagine that happening at Ryanair, whose boss Mike O’Leary even wants his customers to pay to use the bog on the plane.

Strike three begins, or rather, ends with my wife receiving a cheque for £250 from BA last week, after the airline initially lost her suitcase on our return from Rome.

When it was finally delivered, 36 hours later, we immediately noticed the small padlock on the zip pull had been cut off, with jewellery and lingerie to the value of several hundred pounds missing, plus the damage to the suitcase itself, another £55. The only receipts we had were for £195, so my wife claimed compensation for a total of £250.

Although its customer department responded quickly, BA was unwilling to pay my wife’s compensation claim in full. Happily, after further discussion between my wife and the airline, plus vital help from The Observer consumer journ-alist Margaret Dibben, BA saw sense and a cheque arrived swiftly.

The reason why I now intend to fly BA whenever I can is simple. If this theft had occurred with some discount airlines, I suspect they would have refused to pay us any more than the legal minimum of £60 for the lingerie, plus a token amount for repair to the suitcase and getting even that sum would probably have taken us many more months than it did with BA.

What this experience teaches me is that any business must have two elements to its proposition to consumers.

The first is clearly cost. But anyone who thinks you have to be the cheapest at what you do is wrong – as long as you are within acceptable limits, or can justify your additional charges, you will still win out.

The second, related, point is about customer service. BA was not perfect but anyone who has had experience of the dehumanising treatment meted out by so-called “no-frills carriers” to their passengers will admit they are like chalk and cheese when compared with the regular airlines.

Which brings me on to trail commission. Last week, Aegon warned the FSA will need to be careful about how it polices trail retention after the RDR. The FSA has said trail will stop if advice leads to product changes and trail cannot be paid on new investments but it can continue to be paid in some cases, such as fund switches within life products and in the event of automatic product changes.

Aegon head of regulatory strategy Steven Cameron says there is a danger that by focusing supervisory efforts on trail retention, the FSA will indirectly encourage advisers to move clients out of suitable products. Ironically, his warning follows earlier fears that IFAs would be unable or unwilling to switch clients for fears of losing their trail.

Let’s go back to basics here. As with any other charge, there is nothing wrong with trail as long as it is not sneaky or hidden and can be justified by reference to the additional service you are giving your client to earn it.

I suspect all the angst from IFAs on this issue – and responses to them from people like Steven Cameron – is that those basic principles of customer service have been ignored for too long by too many advisers. Trail became another form of deferred commission.

Those days will soon be over. But charging for an appropriate and quantifiable service will not. If British Airways can do it, so can you.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 24 comments at the moment, we would love to hear your opinion too.

  1. Nice article. I am another BA fan for many of the same reasons that you have set out. Having once been kidnapped by RyanAir – I would do everything possible to avoid flying with them. Faced with a choice of flying direct from Edinburgh to Paris with RyanAir – or via New Zealand with BA – I’d always go BA.

    That said, MOL is a PR master and I shudder every time the tabloids believe his scams. The nonesense about stand up seats for example. The Boeing 737 is not certified to have moe than 189 people on board by CAA rules – so he cannot put more people in – but they always report it as fact!

  2. An especially patronising offering this week Nic.

    Most of the ‘angst’ has arisen from opaque and misleading regulatory pronouncements preventing advisers from making adequate business plans. The rules as they now appear to stand will I fear lead to a range of market distortions.

    Sorry to hear about your lingerie trauma, you do have a lot to put up with.

  3. What a stupid analogy!

  4. This drivel is starting to sound like episodes of The Archers.

  5. Nic, did British Airways provide you with a full breakdown of its costs which justified the extra £25, and did it conduct a full fact find and provide you with a suitability letter that demonstrated that the free shit magazines were appropriate for you etc etc and so on.

    I think Nic is getting bored of the same old comments (like this one) and is trying to deter advisers from reading his articles altogether, e.g. by writing three unbroken paragraphs about his wife’s knickers.

  6. “Happily, after further discussion between my wife and the airline, plus vital help from The Observer consumer journ-alist Margaret Dibben, BA saw sense and a cheque arrived swiftly”.
    Says it all really.
    You are in the same category as Hector, be afraid, be very afraid, Sants.
    When will you realise we do not care for your patronising posts on how we too can prosper if we will only follow the integrity set forth by hacks, witch magazine and Hector & Co.?

  7. I somehow think that Mr Lingerie has scored an own goal here. He is staying with BA because their proposition is clear and understandable.
    Then he twitters on about the trial commission position which is not clear and understandable, and will continue to be unclear and un-understandable after 2012 ends.
    Can anyone decipher what the point of his ramble is, other than the cheque he receives in respect of it.

  8. I can honestly say that if a member of our staff had stolen Nic’s fiancee’s lingeree then she would have been refunded in full – plus probably a cheque for the inconvenience!

    I am, as I type, looking for the COBs that deals with this issue to check this is what the FSA would want too.

  9. The one ‘constant’ in respect of regulation is they inevitably create market distortions, many of which fall under the ‘laws of unintended consequences’.
    However, for all that we CAN blame the regulator, probably justifiably; inability in adequate business planning falls more properly into the laps of individual businesses concerned.
    Because another ‘constant’ in the regulator’s output has been the clear direction of travel over the last 6 (that’s right SIX) years… we may not like the constant, or agree philosophically with it, but the tales of King Canute and Don Quixote show the result of ignoring reality…

  10. The thing is that if the flight had been on time, had you not needed to pay extra for baggage, if your suitcase hadn’t been lost, if the contents hadn’t been pilfered and if you had been able to last a whole two hours without being fed (or even having a pee) you would probably think that the extra cost was pointless / irrelevant / unnecessary / a scam.
    I note that those who think that paying extra is worthwhile are the ones who have learnt from painful experience that cheap isn’t always beautiful.
    So, you too will probably think that paying for comprehensive high quality independent financial planning and advice is an unnecessary expense … until you too become a victim of the Michael O’Leary of financial services and you too come round to thinking that maybe it would have been worth paying a bit extra after all …
    The only trouble is that I’ve never found the “pay me more now so that when it all goes pear-shaped I’ll sort it out quicker” to be a terribly convincing marketing strategy …

  11. Thanks for sharing with everyone how you tried to take me to our wedding the cheapest way possible and the story of what happened to my Bill Grundies.
    Only saving grace is that less and less people are reading this every week.
    Tea will be in the dog when you return this evening

  12. OK Nic, what would you in your infinite wisdom deem appropriate levels of both initial fees for full financial planning and ongoing annual service ?

  13. Looks like Nic needed to write an article to provoke a reaction, given that last week’s offering recived only 2 (rather feeble) comments.

  14. A bit of a ramble but in a nutshell if we (IFAs) are clear about our charges and provide a service that clients (the public) appreciate then we do not have to cut our throats to be the cheapest.

    Some of the public want the cheapest (hence Ryan Air and Easy Jet exist) but some appreciate service (hence BA).

    The thing the Regulator should be focusing on is ensuring that the ones claiming to be the cheapest are clearly showing all of their charges and not hidding the real costs.

    At least some of us understand Nic’s analogies:-)

  15. Agreed Ian, Although analogies are no excuse for the patronising tone.

  16. Paul S, Cardiff 16th March 2012 at 1:42 pm

    While Nic’s central point that a value proposition includes more than the price if explained properly – an analogy that I think is readily transferable to all businesses including ours, is valid, there are a number of flaws in this particular argument.

    Firstly, there were ‘several hundred pounds’ worth of jewellery in the checked in luggage. And Nic expects compensation. Really? Clothes in suitcase I understand but valuables should be carried with you. Same as leaving valuable jewellery on a car seat, insurers generally won’t pay up. You are just encouraging baggage thefts. I don’t lock my hold baggage – let them look, nothing valuable in it, no damage to bag.

    Secondly, BA has BY FAR the wort record of any UK based airline for losing and damaging passenger baggage. See e.g. http://www.independent.co.uk/travel/news-and-advice/more-ba-woes-with-lost-luggage-claims-1991065.html where 1 in 3.8 BA passengers is reported as suffering such problems, whereas only
    in 12.5 Ryan Air pax was affected in 5 years up to 2010.

    Rayan air’s own statistics on its web site say it had fewer than 1 in 2000 pax affected by delayed baggage in Jan 2012 and that it is ‘Number 1 for fewest lost bags’. So if Nic had flown with RyanAir, despite their really sneaky extra charges, which I despise (like I despise trail and other ‘hidden commissions), the bag would probably have arrived intact and ontime.

    I’m in no way an advocate of RyanAir but BA’s nasty little snacks (on short haul) and appalling customer service would not make me choose it over a budget airline, if times and route were equally convenient.

  17. i have had the best laugh today in a while, its going to be a great weekend.

  18. Beg to differ Nic. I Flew to Mauritius with BA on honeymoon, my case was sent to Miami. Good start to the honeymoon, My complaint was not resolved as quickly nor was it as financially rewarding as yours. So all I gathered from your article is that its all about who you (or your wife)know…… oh and also a reminder to pack each of the two cases with half my stuff and half my wifes stuff so that if one goes missing your are not left with one sorry person with nowt to wear.

  19. I actually thought it was a half decent article and a fair illustration of value over price.

    Why all the fuss?

  20. When I see anything with the name “NIc”, it has the same reaction as the name “Hector”!
    Both have a lot in common.
    Most Irritating!

  21. The important thing, Nic, is that you had a choice…

  22. Interesting reading the comments. Many of you get it. Some of you don’t. No probs.

  23. I tune in to this like a moth to a candle. What a load of dribble comes from the mouth of this hack. Why dont I learn and stop reading it and then responding. I must like getting incinerated….

  24. Trail of the lonesome whine…

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