Firms give account of the customer removal process following concerns over orphan client treatment
Providers have defended how and why they remove advisers from a client relationship as debates continue over orphan clients and alleged poaching.
A number of advisers have told Money Marketing in recent months that they have lost clients without their knowledge or due to administrative errors.
Some advisers have questioned whether providers – particularly those with a direct-to-consumer or in-house advice business sitting alongside an intermediated one – have an incentive to cut out external advisers without just cause so that they can keep the client within their group.
Planners have said some providers have automatically removed clients from their agency because they did not respond to a communication in time, or providers require the client to proactively confirm they are still receiving advice from a nominated individual if they do not want the relationship to be cut.
In its recent platform market study, the FCA expressed concerns about how orphan clients – those left without an adviser – are being treated.
Money Marketing approached 10 providers for details of their processes for removing clients from an adviser’s agency. Eight had responded at the time of writing.
How providers are positioned
Providers have reported employing a range of tactics to ensure that adviser agency records are kept as accurate as possible, and sufficient checks are made before clients are made orphans.
Old Mutual Life Assurance says that it will note who the company has on file as the client’s adviser in communications to customers.
The firm says that a client’s relationship with an adviser can be terminated at the request of the client or the adviser, or when Old Mutual identifies an adviser has become de-authorised through updates from the FCA, and that there is a consistent process regardless of which internal team handles all the information.
Only in “exceptional reasons” can Old Mutual choose to cancel the adviser’s agency itself, but this happens very rarely and is likely to be when it discovers some kind of financial crime has taken place, it says.
Money Marketing’s six key questions on client agency:
- In what circumstances is a client’s relationship with an adviser terminated?
- Is there a dedicated individual or team responsible for telling the adviser agency has been terminated?
- How long does it take on average to terminate a client’s relationship with an adviser?
- What stages does a company go through to terminate an adviser agency?
- How can advisers reinstate an adviser agency if the client does still have an adviser?
- If you have an advised and direct-to-consumer arm, indicate how you avoid conflicts of interest between both arms when it comes to client ownership.
Standard Life Aberdeen says that aside from cases where FCA status changes apply, “the relationship is a private agreement between adviser and client and therefore we won’t know the circumstances which led to this decision [and] on that basis only the adviser or the client can terminate this agreement by contacting us”.
At Old Mutual agreements can be terminated immediately if necessary, and both the client and adviser will receive correspondence when there has been a change to the servicing agent.
In all instances, the relationship can be reinstated though “if the client and adviser agree the adviser is still servicing”.
LV= says that it needs client approval to reinstate the relationship. However, it will also look at whether any adviser charges need to be facilitated.
Aviva says there are also regulatory circumstances where it might need to proactively terminate an adviser relationship, such as when they become deauthorised.
However, in all other circumstances, the customer must direct Aviva, either verbally or in writing, to terminate the relationship.
Again, Aviva claims that it will always keep advisers informed of changes, processing time for which will vary depending on workload.
Issues with reinstating an agency do not arise because “if the customer does still have an active adviser we would not terminate the adviser on the system”, the firm says.
Aviva adds: “If a customer advises us that they have a new adviser, we ask for a written letter of authority, in order to ensure we have the most accurate adviser information on record and can support the customer and adviser appropriately.”
On potential issues arising from owning a 100-adviser planning arm alongside both a direct-to-consumer and adviser platform, the firm says: “There is no conflict of interest as Aviva does not advise nor market advised products to customers who are already in an active adviser relationship.
“Where we identify customers who we believe are no longer advised due to their adviser no longer being in business we can offer support on a non-advised and advised basis dependent on customer choice.”
All providers say that advisers will be automatically informed when the agency changes. One exception to this is Aegon, which says that “if the instruction from the customer is a transfer of servicing adviser we don’t inform the current adviser unless the customer asks”.
Aegon agrees to complete any termination in five days from the point of contact, as does Zurich, compared to up to 10 working days for Standard Life Aberdeen. The latter firm says that without a full and valid instruction on who a client’s new adviser is, they will become an orphan client, though it “would always strongly encourage clients to seek alternative advice provision”.
Standard Life Aberdeen adds that it manages the potential conflicts over these clients being taken on by advice arm 1825 by not giving it access to customers that are not its clients.