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Put a stop to false online advice

The most destructive bouts of misselling have shared the same visible early-warning symptoms. They are present again in one hitherto unnoticed corner of the market.

Tom Baigrie
Tom Baigrie

Sales diseases seem to take many years to become obvious but in the meantime those trading in the symptomatic way earn very well while a bemused regulator looks on and tries to work out whether tackling the new and thus unproven abuse would be unduly influencing the market. Eventually though, consumer detriment becomes patently obvious and the regulator moves in to cure the fever as more and more consumers start to complain that they are suffering.

The symptoms are all apparent right now. In a currently small corner of the market, consumer demand is there but ignorance is the norm. New players enter the market from other broken markets in search of the commission available. They bring the hard-line sales tactics that are their key to success. The resulting many small start-ups and one or two bigger firms are all developing a reputation for sharp practice and boast ambitious growth plans. The big institutions are following in fast.

It should sound familiar, the sequence is eerily similar to that seen in pension transfers, endowments, payment protection insurance and sub-prime mortgages.
Just like in those cases, the result is again a rapid increase in a new version of old and proper business activity, the new one done through a regulatory gap, and done hard and fast and with a sharp increase in churn activity and lapsing policies.

The new game on the rough edge of town is the telephonebased selling of Icob products without advice. It sounds boring but it carries within it the seed of serious reputational damage to us all. It will take time for the consumer detriment to manifest itself, but when it does, the suffering consumers will be seriously ill or recently bereaved, so we can expect no media mercy.

A major insurer told me today that this sales method will continue its current 200 per cent plus annual growth in market share until at least a third of all protection sales are made through this channel.

The trick is simplicity itself and a bastardisation of best practice – you tell the client that you will not advise them but you then impart all information that promotes a sale and none that hinders it. You prey on consumers’ half-knowledge with half-truths and, to make a quick churn, you use phrases like, “criticalillness benefit is very expensive but many people choose terminal-illness benefit and XYZ Life have a special deal on now that includes life cover if you apply in May.”

Or, “a joint-life policy costs less than one each and you do not need to bother with those complicated trusts.”

Or, “We do not deal with ABC Life because their claims’ record is not very good.”

To succeed you simply invest in lots of sales training and no technical stuff, other than the jargon needed to impress gullible consumers after a cheap deal. You link up with a few providers to whom you promise vast volume and you flog, flog, flog. And the regulator will not bother you for years yet.

The Financial Ombudsman Service once said that they saw no way that a salesperson could have a telephone conversation with a customer and not give them advice.

It is time the FSA saw that truth and clamped down on non-advised telesales boiler shops. Non-advice should never involve a sales conversation and that means it should be online or not at all.
Tom Baigrie is managing director of Lifesearch


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. Stuart Rathbone 14th May 2010 at 2:22 pm

    Spot on as usual. I just hope that when the brown stuff hits the fan companies responsible are still around and big enough to pick up the tab. Sadly I doubt they will and as usual we will have regulatory histrionics and we will all have to cough up.
    Such is life.

  2. Absolutely spot-on. Look at the reputation that the travel insurance market got following non payment of claims due to the volcanic dust cloud. You get what you pay for. Companies like Meerkat manor, should have a wealth warning attached. And the ones who make most money from all of this will be long gone when the sh..t hits the fan!

  3. Leon Jone-Mackay 14th May 2010 at 2:48 pm

    Its not just the products they mis represent its the Data which they sell on which is collated! I had selling my information on with in the space of 5 minutes when I excepted the car quote at the top of the page after explicitly stating I do not wish to be contacted… Ok I failed to read the print saying gocomapreelsewhere will not contact you, but what we failed to mention is your information will be handed over to the competitor who was quoted second!!! And there allowed to conatct you instead …. The internet sales disease just like internet dating has become a cloaking device for responsibility whilst faceless sites infectiously spread along with Large supermarket chains diving in on the band wagon… My comaprison is this if you want to sort out an insurance claim speak to your broker not the lady on the fruit and veg isle!!

  4. Would totally agree with Tom’s comments above and like to add a few other points. The first one being that any telephone conversation or face-to-face conversation always ends in advice, even if this advice is given in a indirect way by supplying so called information only. It is not only protection salesperson that we have to worry about but also Accountants and Solicitors that give advice when they do not hold FSA regulation.

    If the FSA wants to regulate financial services advice it needs to clear up what advice is and who can give it. It’s no good saying that advice it is coming from a regulated individual when it takes no action against people that give advice with no regulation.

    Execution only business should be banned in my book whether is supplied by online business or a Bank, it will always result in high levels of complaints-which we as IFA’s end up paying for by higher FSA fees.

    I also do not agree with the practice of online lead supply companies that have big advertising budgets but in fact do not have any advisers as they sell leads onto IFA’s. I’m not going to name them for obvious reasons below: This of course is a deception as the client feels that they are getting advice from the organisation that they have given their personal information to. I have used these services before and have always questioned the quality of the information as sometimes I’ve had the impression that it has been made up. I once had one of these leads and tried to phone the client on several separate occasions although I was getting a ringtone I never got through to the client. So I decided to call on house one night only to find out the client have moved six months previously. When I pulled this to the leads providers attention they refuse to give me a refund due to the fact that the telephone number which was a mobile and therefore was a valid telephone number. I pointed out that I did call on the house although they did not believe me and continued to state that the telephone number was active and that their terms and conditions only allowed four refunds on bogus information. I suppose my question is what is stopping an organisation from manufacturing data abd simplely buying a Sim card for a mobile phone and never answering the call and then selling that data wrong to unsuspecting IFA’s not saying any of these organisations are doing this but it does make you very suspicious.

    The problem with this business model is that there is no comeback to that original organisation that generated the lead and there seems to be a whole business and marketing industry going on in respects to supplying independent financial advisers with so-called sales leads. I believe that this is potentially a dangerous development within financial services that is likely to bite IFA’s in the ass some time in the near future.


  5. Persistency – KPI – Compliance?

  6. The FSA really have got to get to grips with nn advised telephone based selling.

    Look at the issue with Click. It appears to be an accident waiting to happen. Its a shame that proper advisers get tarred with the same brush

  7. How comes something so obvious to every one doent get stopped bt regulator, could it be power of big banks? mind you theyve never done any thing wrong have they. Had to put the phone down on endsleigh insurance via compare the market as they could sort our correct premium and kept hard sell up on accident insurance

  8. I am not in total agreement – companies who twist truth and dont explain the policies properly should be the companies who are in trouble. But saying all non-advised protection sales companies are “boiler rooms” is a bit extreme!

    I work for a company who are non-advised but we explain the details of the policies – giving customers the choice of which one they want, or none of them! At the end of the day life insurance isnt difficult to explain or understand – do people really need to be advised before deciding which one they want?

    So I ask you what is better – explaining each policy, how trusts work, the difference between Terminal Illness and CIC and what pays out and what doesn’t – then letting the customer decide on the policy that best fits their requirements. Or giving them giving someone limited info then being “told” what to buy and being charged a fee/higher premium.

    If non-advised is completed professionally then it is cheaper and the customer is in control – the key is the explaining the facts properly without bias.

  9. Martin Williams 17th May 2010 at 6:13 pm

    Life and cic business has to be properly explained. You can’t replace a cic policy without thoroughly going through the terms and conditions of the old plan. We compare definitions to the extreme, whereas not only do we employ a GP to help with the definition changes we also speak to claims to clarify points we need more understanding on.

    We make our clients fully aware of any changes however small before proceeding.

    It is a minefield and you can’t just knock out plans just on premium and new obscure illnesses which may very well be on the new plan.

    So your point on life insurance not being complicated i do disagree and I suggest you tread very carefully…..

  10. CIC and IP cannot be sold without advice unless it is a tied operation where only one product exists.

    It is inconceivable that these plans can be sold on any basis other than price. I cannot fathom how any worthwhile conversation could fail to stray into the realms of advice and whilst I believe that consumers should have a choice I also believe that consumers approaching bucket shops should also visit their counsellor.

  11. I agree with Tom baigrie and Alan Lakey on this one, but I DO take on board what the poster at Anonymous | 17 May 2010 1:13 pm has said.
    The simple answer is that the FOS shoudl work on the assumption that advice HAS been given unless the non advised seller can evidence that there was NO advice whatsoever in the whole process with the reverse of common law, i.e. Guilty of giving advice unless proven innocent.
    You may say, well how can this be evidenced and it is VERY simple. the FOS already reccomends that general insurers record all phone calls and for stockbroking/dealing i think you’ll find the call recording is mandatory too.
    We as an IFA firm have voice recorders attached to all our phones and all client meetings are recorded as MP3 files eitehr using a laptop, PC (when in office) or even a mobile phone. Usually about and hours recording is 1MG, but can be compressed adn saved on our back office system via our server indefinately. For us it evidences the actual advice given, NOT just the KFD and RWR and it also demonstrates intent, emphasise, use of languange and client responses. IF they want to be able to do this mass market “Non advised” bullshit, then they should be required to record ALL this non advised sales to demonstarte that advice TRULY was not given and warnings about lapsing plans in Trust or with older style CIC restrictions wer fully understood by the client and no sales pressure was applied.

  12. “There are some things in life where going for the rock bottom cheapest is not always the wisest course.
    Good examples are:
    Scuba Breathing Apparatus
    Life Insurance”

    True 25 years ago when I started. True today

  13. There’s no doubt that an online process is easier to ensure technical compliance on (but we can’t prove the customer read the page properly), than a telephone based sale, unless of course the call is recorded and indexed for the term of the policy.

    In this way a complete record of who said what is always available and it sure be crystal clear if advice was given. Compare this to the face to face sale where no record of who said what is possible.

    It’s easy, lets remove the firms that cheat the rules and cherish the professionals that don’t. But don’t blame businesses for trying to make a living within the rules, if the rules aren’t right then lets change them.


  14. To Mike Ward – One small correction it IS possible to record the Face to Face sale and we DO as a firm. Our first ever complaint (in 12 years) has been rejected because the clients claims/accusations do not match her own statements at the time of the sale. We have heard nothing from her or her solicitor since we rejected the complaint having sent ehr an extract of the MP3 sound file showing specifically why we refuted her claims. IF the FOS were a true alternative dispute resolution system (ADR) we could have resolved this with this lady by mediation, but because the FOS is judge, jury and executioner, we had to stick to the facts rather than try and resolve the issue as any normal business would (i.e. one who can rely on the law to back them up shoudl mediation fail to resovle things)
    She only has one more month to take her complaint to the FOS or she can only proceed through the courts who are obliged to review ALL the evidence and not just the spurious statements of either party.

  15. Just to be clear about this – has a fully regulated protection advice team and offers its customers protection advice on the phone.

  16. I understand that PruProtect are about to cut a deal with Click – good luck!!

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