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Nic Cicutti: Self-righteous ABI is not on your side

If there is one thing that marks out all human beings, it is that we want to feel what we do every day helps others. The idea that we are simply governed by a need to make money at the expense of someone else is not something any of us will readily admit to.

Which helps explain why, when we describe what it is we do most of us like to imply – at the very least – that we are delivering a positive service to the community at large.

This is as true for journalists like me, who pretend that what we write every day has the power to right wrongs and make the world a better place, as it is for IFAs whose lachrymose tales of how they help widows and orphans in their desperate hours of need has never failed to bring a lump to my throat.

What I had perhaps did not realise is how much every other section of the industry feels the same way, desperately needing to cover its activities in the cloak of righteousness.

Take Stephen Gay, former director general of Aifa but now the ABI’s new director of life and savings. In an intriguing interview I saw on one website the other day, he argued that both trade bodies – his new one and the one he formerly led – were “on the same side: the consumer’s”, and that their interests were aligned.

As an example of the ABI’s willingness to “adapt and change”, Gay cited the decision by its members to agree a voluntary code of conduct whereby people could shop around for annuities.

Now, forgive me for saying it, but I am not exactly overwhelmed by this example. After all, if this were the “proof” of the ABI’s alignment with consumers, then it leaves one wondering how it could be that for the best part of the past decade the industry has strenuously opposed attempts to introduce just such a code of conduct or at least derailed them with all sorts of objections.

Not only but one might ask how it is that such a voluntary code was actually agreed almost a year ago yet the precise detail of how it will work has still not been decided.

Intriguingly, in the interview, Gay himself gives a strong hint as to why the industry agreed to a code after all its obfuscation on the issue over the years. “The question was whether we should create a code of practice or have legislation passed. That is a question of the relationship between government and the industry.”

In other words, the ABI agreed a voluntary code because it was either that or have one rammed down its throat. Yet it continues to delay its setting up – even though it knows, because its own research over the years has said so repeatedly, that the reason a minority retirees make use of Omo is a combination of consumer inertia, apathy, lack of awareness, complex application forms and lengthy timescales involved in the process.

Even more laughable is Gay’s approach to hidden charges operated over many years by its members which, let’s not forget this, were structured in order to give a misleading impression of low RIYs for the majority of consumers.

Which begs the question of whether the ABI’s members who came up with these clever charging structures did so because they were “aligning their interests” with those of consumers. Or that when it opposed charges disclosure, as the industry did for so many years, this too was all for the benefit of consumers.

Be that as it may, Gay told his interviewer: “The ABI is not here to argue for the status quo on charge disclosure. We are not standing against the Zeitgeist.”

Except, of course, that the ABI is standing precisely against the spirit of the age: there is no evidence whatsoever that the industry is planning anything like the action needed to ensure this long-running scandal is resolved any time soon.

Indeed, when it comes to explaining why customers’ trust in providers had been eroded, notwithstanding this alignment he chirps on about, Gay blamed a “generally less trusting” society and a “backdrop of increasing consumerism.” In other words, it is all the fault of consumers.

Actually, I really wish people such as Gay stopped talking about “alignment with consumers”. Why don’t we all just accept that we are on completely different sides on this and all other issues. The bottom line is simple – life companies are there to make money as much of it as possible, out of the people they sell products to.

That unadorned reality means you sometimes have to sell things that are not appropriate or have heavy charges allowing you to boost your profits more quickly – and it is harder for those who buy your products to work out how much they are paying for them.

If Gay was to admit that, we would no longer have to maintain the fiction of both of us being on the same side. He could then just get on with his members openly trying to rob customers – and we would then be under no illusion as to who our enemies are.

But that would mean the ABI being unable to feel self-righteous about its day-to-day-activities. We cannot possibly have that, can we?

Nic Cicutti can be contacted at


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. I find myself in alignment with Nic on this issue….sorry.

    The ABI welcomed the original RDR proposals. Indded, readers with long memories will recall that the original RDR document was virtually a mirror image of the ABI response.

    The ABI is a body which many see as driven by the initiatives of Aviva and L&G and let us recall that these two companies also supported the introduction of stakeholder pensions where they believed that a profit could be derived from a critical mass.

    As John Wayne might have said, “ABI man, he speak with forked tongue”.

  2. A few of the observations such as ‘openly trying to rob customers’ are probably unnecessary, but the theme is on target, no doubt!

    Never been a fan of them, so Nic has my vote on this one for the right reasons!

  3. Its fascinating that both AIFA and the ABI supported the RDR enthusiastically and RDR will destroy both organisations and the majority of the members that they currently represent.

    What you fail to cover in your article Nic is that these organisations are so stupid when looking after what they believe to be their own interests they fail to see the bigger picture.

    The ABI supported RDR because it thought it would kill off annoying IFA’s and it will. But it failed to work out how its members would replace the business they provide.

    AIFA supported IFA’s because…well, I don’t think any of us really understood that decisions.

    Darwin covered this and I don’t expect that the ABI, AIFA or the vast majority of their current memberships will still be here in 10 years.

    Less the survival of the fittest and more the death of the headbangingly stupid.

  4. David Trenner - Intelligent Pensions 16th August 2012 at 4:19 pm

    Very good article, Nic.

    I have argued for 30 years for a proper open market option, and at every stage I have seen the self interest of insurance companies block it. A while back at an Annuities Conference I asked an ABI representative why they allowed their members to sell inferior products. I said ‘If they do not want to be in the annuity market why do they foist their rates, often 15% -20% below the best available, on their loyal customers?’

    Amazingly an actuary from an Edinburgh based Life Company (not Standard Life) asked for the chance to reply. She said that they did want to be in the market, but that they did not wish to write non-profitable business. She added that some policyholders have invested with them for 30 or 40 years, ‘so they obviously want to take their pension from us’.

    This thinking from an actuary explains why the government has to legislate, not allow the ABI to prevaricate. Lets face it, there are about 5 companies offering competitive annuity rates at present, which means that more than 90% of ABI members are actually making money out of poor annuity rates.

    The ABI want OMOs just about as much as turkeys want Christmas!!

  5. Becomin a headcase IFA 16th August 2012 at 4:23 pm

    Even I agree with him on this one. I reckon that Stephen Gay would change his views depending on who was paying him to have them. He is one of these people that move from highly paid job to highly paid job and you can’t understand what he does that is any good?

  6. “I agree with Nic” on this one. The annuity scandal! Vultures, waiting for dead people’s money! Give a sop to strangers, but keep most of it for themselves. The scandal that is the annuity market! It is an immoral disgrace. The Plymouth Brethren are right. Call an amnesty. Let people have their money back! Scrap the whole disgusting system.



    The ABI draft response to the FSA’s retail distribution review, confirmed the ABI opposition to the current IFA distribution model. The ABI proposals was to end independent advice.


    The ABI (Association of British Insurers) “claims” to represents the collective interests of the UK’s insurance industry.


    The ABI called for FSA regulation to stop product providers from paying commission to IFAs or multi-ties for the provision of advice about investment products. It also demands a large increase in capital adequacy requirements for advisers, a new light-touch regulatory regime for providers’ direct salesforces and for single-tied advisers to retain the ability to receive current commission incentives.


    Lets be very clear about this – the ABI called for actions that would result in the end of independent advice!

  8. Not sure that I agree that the poor take up of OMO is down to lack of awareness-almost every set of papers I see from the holding company to its client brings this possibility to their attention-but delays and complex forms, yes,too right this is an issue.

    Twice in the last three weeks I have had a situation where because of delays in releasing the funds (one company quotes a fortnight between receipt of all the documents and sending out the monies) the rates have changed downwards. We have only managed to maintain the original rates by threatening to re-broke the case to another provider.

    As to the forms, companies do not need their own discharge forms signed-the standard proposal incorporates an instruction to transfer-they only need a copy of that part of the application and to their credit Scottish Life for example confirmed to me recently that they would act on merely this documentation. Other companies are less enlightened currently.

    It is also painfully obvious that resources allocated by providers to parting with money are woefully inadequate in most cases, probably because this is seen as non productive work. Trying phoning a provider for a quote and the recorded voice will put you through after a ring or two; try asking for some service on an existing policy and you need to have a good book to read whilst you’re waiting as “…all our consultants are busy….”

    As for the main point-who gives a damn what the ABI think about anything? Of course they represent the providers – there’s a clue in who pays them (directly at any rate) and it’s not the customer.

  9. Good to see the indignant comments here – perhaps the ABI can seek guidance from the IFA sector on how best to form a trade association, well funded, that lobbies effectively.

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