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Pru targets churners

Prudential is looking to actively engage advisers it has identified as carrying out unusually high levels of transfer business in a move it hopes will encourage best practice in the industry.

Pru says its campaign has the backing of Aifa and the Personal Finance Society and is a rallying cry to the industry to improve standards and consumer confidence in the financial services industry.

The company will meet and have discussions with advisers that it believes appear to be churning and says that if they then continue to churn, it will look at the options of severing their agencies, cutting their future commission payments or, in extreme cases, reporting them to the FSA.

Pru stresses that analysis of its business volumes and persistency found only a small minority of advisers churning business. It says that if it simply stopped dealing with any rogue advisers, they would just move on to other product providers so it hopes that other firms will join its campaign to weed out the bad apples.

Intermediaries director Tudor Taylor says: “We have got evidence internally that a minority of advisers are abusing their position and moving too much money in the marketplace. If we cannot reform them through education and engagement, then we will take firm action where needed.”

“This is an issue that the industry should rally beh- ind and maybe later we will share information round the industry. There is a duty to blow the whistle where there is evidence of systemic problems.”

Increased focus has been placed on churning with industry analysts such as Ned Cazalet questioning whether new business is really net new money or just recycled cash.

Personal Finance Society public affairs director John Ellis says: “Some IFAs will take umbrage at this but it is common knowledge people are churning, so it is quite right. But you need to have good proof because it can be valid to switch products, so you have to careful.”

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