The life industry's attempts to deliver decent customer service are as laughable as Basil Fawlty's bid for the Hotelier of the Year award. It is a dismal reflection of where we are that an annual statement (where available) is considered a pinnacle of achievement for many. This is not customer service, it is merely the equivalent of being told how much you have to pay when you get to a supermarket checkout.
Before the industry even begins to consider the way in which it interacts with clients, it must consider whether its client proposition can be delivered in a friendly manner.
I would contest that, for as long as we continue to punt investment bonds with bid/offer spreads, initial charges, establishment charges, loyalty bonuses and back-end penalties, there is no prospect of customer service standards meeting modern expectations.
Until the bulk of the financial engineering that goes into concealing commission payments is consigned to history, the ability to deliver on service will be constrained. The first company that breaks ranks and begins to promote itself (and deliver) on a long-term value proposition will be the first company that will have any possibility of delivering on customer service.
There are many quality IFAs who consistently deliver as strong a level of service as the product providers will permit but their client relationships are consistently undermined by the poor performance of the manufacturers.
I am not sure how the Origo thing is performing these days but I remain to be convinced on providers' commitment to delivering straight-through processing for the life of products. From a share of margin perspective, it is not really in the life industry's long-term interest. As far as I can see, the life industry spends each working day helping to destroy IFA/client relationships the length and breadth of the land. Not good.
The other key point that should be observed is that, in order to provide quality service over the life of the contract, you must be in business to do just that. Without wishing to dismiss the abilities of any of the run-off companies, it seems probable that should a company be closed to new business and seeking to simply derive value from the existing book, standards are likely to slip a little. Who would bet on the survivors five, never mind 30, years from now?
Of course, for the life industry to develop any kind of serious interest in customer service, it must first develop a serious interest in its customers. By that, I do not mean working out by how much they can screw the punter in order to reward “their” IFAs. Life companies must actually begin to consider what the long-term needs of their end clients might be.
They must come to appreciate that an extra 1 per cent allocation on a bond is likely to be utterly irrelevant compared with the relevance of the underlying investment performance.
The most difficult issue as always with this industry is legacy business and the management thereof. Although this is a problem with an end, it must be acknowledged that the end is some way off.
Unhelpfully, of course, it is the oldest businesses that have the deepest service problems and the least impetus to improve. While this may be a big hurdle to a long-term improvement in across-the-board service levels and the resultant building of trust with the public, this does not mean that life companies should persist in the traditional manner.
The automotive industry did not retro-fit airbags into cars but it still took positive action to ensure that, where the technology was practically and economically available, safety was improved.
David Ferguson is a director of The Abacus
