Norwich Union says it plans to gradually phase out high initial commission payments over the longer term and work with advisers to provide them with the training and support to move their businesses to trail or fee-based remuneration models.
The UK’s biggest insurer is working with a specialist consultancy to develop a training package that will be rolled out to IFAs in the second half of the year.
Executive director David Barral says the company is concerned about low persistency rates in the industry and mounting regulatory pressure for a change in distributors’ remuneration.
NU has also started having conversations with 200 IFAs it has identified with consistently low product persistency rates, which could result in it terminating agencies.
Barral says IFAs making the transition away from initial commission will reduce the persistency issue and improve client trust while building greater long-term value into their businesses.
The training package will include cashflow modelling software that identifies which clients are best suited for migration onto a trail basis and NU will provide support and advice around this.
NU last month agreed to support The Money Portal’s transition to fund-based commission by agreeing to pay higher commission for five years to offset any short-term income falls for advisers making the switch.
Barral says: “We want to phase out initial commission eventually. It is a question of tough love and supporting advisers through the transition, working together to solve the problem.”
Holborn Financial associate director Olly Pughe says: “This is a very good move. It is the future of the business and if an insurance company wants to get on board with that, be it NU or anyone else, it can only help. This is the future, it is just a question of when the rest of the industry catches on.”