What are the obstacles to resurrecting a viable life company salesforce? I ask the question because last week I wrote a slightly tongue-in-cheek column asking what was wrong with the idea of a “well-trained and tightly regulated direct salesforce, offering a limited suite of good-value products”.
The replies, sent to me both at my personal email address and also at the bottom of the article on Money Marketing’s website, were extremely interesting.
Many of the direct emails involved personal reminiscences of what it was like to be a salesperson in the 1980s and 1990s. One correspondent, now retired, sent me an entertaining (if slightly scurrilous) 1,500-word memoir, including superb descriptions of the personalities he worked alongside.
Most of those who contacted me waxed lyrical about being a life company salesperson back then.
The general feeling was that once you got past the first few difficult months and became confident in the job, life was good. It was not too difficult to make a reasonable living and if you were motivated you could be earning significant amounts.
There were minimum sales targets to meet, of course, but these were mostly easy to hit – especially at a time when regulation was nowhere near as onerous as it is nowadays.
The problem, of course, was many of the products were expensive and structured in a way that punters who made policies paid up or surrendered them before they matured often got back a lot less than they had paid in.
Why is this? The logic of the situation is explained succinctly by “Matthew”, who contributed the following below my online column: “Salesforces have only one driver – numbers. Numbers equal profit.
“The board develops a proposition (usually transactional with poor value products) that creates a margin, they calculate how many sales will be required to hit a pre-promised profit level then pass this to managers to push sales.
“Once the numbers are achieved, everyone is happy and rewarded accordingly. The customer is always a secondary consideration.” I suspect Matthew is right. At the same time, it strikes me that short-term greed will always come back to bite your backside.
Back in the early 1990s’, one of my Money Marketing colleagues was Iain Anderson, now the grandly-titled “director and chief corporate counsel” at the public affairs consultancy Cicero Group. Back then he was a spotty young reporter covering life companies.
I still recall the palpable excitement in Money Marketing’s office when Iain came in with an exclusive story to the effect that NatWest was proposing to set up a bancassurance arm, to be headed by Lawrence Churchill, now chairman at the FSCS as well as Nest. NatWest was soon followed by Barclays, Lloyds and other major banks.
It sounds almost incredible to say so today, but at the time many at Money Marketing wondered whether the emergence of bancassurance marked the beginning of the end of both traditional life company salesforces and – potentially – of IFAs themselves.
The assumption was that bancassurers would create a suite of cheap products and target a captive audience of millions of bank customers with them, wiping out independent advice in the process.
So worried was Garry Heath’s old advisers trade body, Nfifa, that he even set up a short-lived campaign – BankWatch – to focus on the banks’ nefarious activities.
Ironically, within 18 months it became apparent that bancassurers were posing no threat whatsoever to the IFA sector or of standard life companies. Their products were rubbish and the training and sales skills of their salesforces seemingly worse. Life companies saw off the challenge and their continued existence had no real impact on the way independent advisers carried on their business. As more recently, over the past year or so the banks have gradually withdrawn from the market completely.
The lesson I draw from that entire experience is that if you try to create a sales operation geared to maximising profits from Day One by offering poor value, misselling along the way, you will get found out quickly. The people who should have beaten a path to your door – millions of bank customers – will end up shunning you instead.
Does it always have to be like that? I do not know the numbers in terms of what might constitute profit or loss for a bancassurer. But it strikes me that top IFAs have long been able to create and keep viable businesses through their knowledge of the market.
Intriguingly, firms like Virgin Money have tended to do the same on the banking side with simple saving, mortgage and tracker investment products, as well as basic term assurance. It did not have to be the best in the market, just good overall value – and Virgin was able to create an interesting niche business out of it.
So cannot life companies – and banks for that matter – go back to the drawing board and build the type of slow-burn operation that does not treat customers as mugs and marks to be taken advantage of, but human beings to be nurtured and cherished over decades. It is not the RDR that stops them doing so, is it?
Nic Cicutti can be contacted at firstname.lastname@example.org