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Providers attack non-advised brokers ahead of FCA annuity review

Two of the UK’s largest insurers have turned their guns on non-advised brokers ahead of the publication of an FCA review of the annuity market.

Providers have faced an avalanche of criticism in recent months, with pensions minister Steve Webb suggesting they are making “excessive profits” from annuity sales.

The FCA is expected to publish the findings of its 12 month thematic review into annuity pricing and shopping around later this month.

Legal & General pensions strategy director Adrian Boulding (pictured) says distribution of annuities, rather than the product itself, is the biggest problem in the market.

He says: “Increasingly a lot of bad practice is being exposed in the distribution of annuities, in particular at the non-advised end where there are all sorts of vague introducers who appear to be operating without any FCA authorisation.

“The distribution is where the heat is and the Financial Services Consumer Panel have certainly been prodding the FCA to say that some of the practice in that space is unacceptable.

“There are clear grounds for the FCA to shake up the distribution of this marketplace and tackle some of these distasteful practices.”

Aviva head of policy John Lawson criticises insurers who pay large sums to non-advised brokers. A report from the FSCP, published in December, found some non-advised annuity brokers were charging up to 6 per cent commission.

Lawson says: “Something needs to be done to clean up the non-advised market and I think regulation is probably the only way to do that.

“There are non-advised brokers out there taking up to 6 per cent commission, which is outrageous. The insurance companies who are paying that are just plain stupid and they are complicit in this bad practice.

“We would never pay a commission anywhere near that level. The commission we normally pay is closer to 1.5 per cent.” 

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. How do “vague introducers” conduct business without the express involvement of the not so vague poviders?

  2. Quick fix. Regulate the organisations offering non-advised services and force them to provide a cost of service which the client must explicitly agree to before the sale can proceed.

    Simples…

  3. And yet they continue to accept business from them?

    I think these statements might be a ‘its nothing to do with gov’ approach when the review is published.

  4. I am sorry to say that I couldnt care less how much these guys/girls earn in commission from annuities. If people are stupid enough to think that they can get a “deal” by not taking advice as they dont want to have to “pay” for it, then hell slap it up them. Is there any evidence to show that these brokers do not show the commission? After all it is highlighted on each quote plus the final quote that goes to the client from the provider has the commission on there. I am sure that 90%+ of advisers could do a better job and charge less than the 6% quoted (however I would be surprised if this is not the odd exception as apposed to the rule and yes I think that is a tad over the top). As for Aviva saying they would only pay closer to 1.5% commission, it would be very obvious to me that they are not doing a lot of non advised annuity business (what a pity). The one good thing that the RDR has brought out is that providers are no longer in control of the level of commission they pay. Apart from anything else has anyone looked at the difference on a £50k pot pays to a 65 year old on a nil commission basis versus 3 OR 4%?. it is a lot smaller than you might think. Personally I charge up to 4.5% AC but they get fully advised service for that and I carry the liability. These non advised brokers better make hay while the sun shines, however it will be interesting to see the outcome seeing as how the FSA and the FCA have stipulated they are not a price regulator. Why not make providers request confirmation from the client (before issuing the plan) that the understand that commission in the amount of £X will be paid to their broker upon completion. No response comes in then no annuity pruchased. That would be an interesting one to ponder. Better still outlaw annuities being sold on a non advised basis. Atleast then the clients would have some comeback if it turns out to be bad advice. Currently with these non advised sales, caveat emptor applies.

  5. Wow, how crass can you get. Both Aviva and L&G have been mis-selling annuities on a a mammoth scale for years to hundreds of thousands of people. I guess they are trying to throw attention from the real issue and if the fca had any balls they would order a review of all annuity sales which would again cost the insurance industry billions. But at least it would give millions of mis-sold pensioners so e money back in their pockets!

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