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Protection faces knock-on effects of RDR


Legal & General RDR and commercial director Danny Wynn says the retail distribution review will have a big impact on charging structures in the protection industry.

He said: “The RDR may not directly apply to protection but it will have a substantial knock-on effect.”

Wynn believes there are three options for IFAs writing protection business after 2013. He said: “You could use separate, autonomous business models for protection and for investment business, you could charge fees for protection advice or you could charge fees for wealth advice and earn commission on protection.

“However, if you combine the two charging structures in one business model there is a possibility you will undermine the argument for fee-charging.”

Plan Money principal Peter Chadborn says advisers will struggle to charge a fee for protection unless it is part of a wider financial advice service.

He says: “It is widely accepted that charging a fee for protection will not work but many clients are willing to pay an annual fee for a comprehensive financial plan.

“You have to look at it as a package and incorporate protection with clients’ other financial needs. That is the most workable model, it is what we already do and I cannot see it changing.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Guess I wont be using L & G for any protection products. Fee charging for protection advice is most definately not an option. In case Danny Wynn hasn’t realised or lives on a different planet, Protection products have to be sold to clients they dont roll up to buy them.

  2. 22nd February 2011 at 4:37 pm

    What does he mean ‘it is what we already do?’ I*s he a financial adviser?

  3. Sadly the News of the earthquake in Christchurh NZ reminds us of un avoidable tradgedies that happen. Such events are in the main out of mans control, yet wisdom and common sense work together in preparing for the outcomes of unpredictable events.

    The RDR has the capacity to deliver cataclysmic outcomes for both the consumer and our industry yet is completely avoidable. Why does it have to be like this.?

  4. This could be a blessing in disguise. If you charge a fee for making protection recommendations you earn money whether the client sets up the plan or not.

    The trick is getting them to pay the invoice.

  5. Yet another example of joined up thinking (not) at Budgerigar Terrace!

  6. I’m not sure Mr Veitch has fully understood Mr Wynn’s views. If I’m reading Mr Wynn correctly he appears to simply state that advisers will be able to choose how they charge for protection advice, not suggesting this is the way to go.

  7. Why is fee charging for protection advice bad? That “oh no, never” approach reminds me of mortgage brokers who didn’t charge fees for mortgage advice.

    Real financial planners will make recommendations on protections which the clients will implement, without there being a need to disturb, sell or force. That is the value of a fee based advice model.

    Unless you learn to get that into your minds, you will simply be salesmen – and part of the the RDR is all about getting rid of salesmen.

  8. I thought stupid agruments like this where the preserve of the FSA and Mark Hoban…..

  9. Let us all be clear, being paid by a cheque for advice would be the favoured option by all advisers if it could happen.

    The only fly in the ointment is it is not the client’s favoured option.

    Here lies the issue.

    The only problem with the RDR is it will not solve anything at all and will cost an absolute fortune, looking at some of the budgets set aside by large organisations £1.7bn is looking like the tip of the iceburg.

    Quite incredible that this is happening at all.

  10. Generally, people have to be ‘sold’ a protection product, since they are to pay a monthly premium out of hard earned income (in these hard times) and probably giving up a more pleasurable activity instead. Now asking them for a fee as well??

    Are we all living in Cuckoo Land!! Where is the logical thinking behind this Invention, which would be considered a joke in my real profession??

  11. I think many of the comments here are completely missing the point, it is inevitable that as RDR comes in some type of fee structure will be used by advisers when advising on protection, especially as part of a holistic financial plan.

    Selling standalone protection with no other advice is going to be a tough gig on a fee basis but how (and more to the point why) would you justify “charging” commission for protection and fees for investment elements of an overall financial plan?

    As Peter says clients are perfectly willing to pay a fee for this holistic financial plan, which will include protection advice.

    Perhaps some sort of offset arrangement could be used i.e. use protection commission paid to reduce the financial planning fee bill…

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