Protection providers are increasingly asking directors of directly authorised firms to sign agreements accepting personal liability for commission clawback.
Advisers have alerted Money Marketing to a growing trend to ask for director’s personal guarantees in certain circumstances.
Bupa, Legal & General, LV= and Scottish Provident have all confirmed they request these guarantees from some directly authorised firms.
Bupa checks for any outstanding debt held by a DA firm and the firm’s credit rating. If this is considered to be unacceptable, Bupa will set up the agency on a non-indemnity basis and, if asked to switch to indemnity terms, will ask for a personal guarantee.
A spokeswoman for LV= says: “Since early 2010, LV= has been asking the majority of new DA agencies to retain personal liability to their directors and partners for clawback commission. This is not the case for some larger firms where we are already satisfied with their financial strength.”
L&G has been asking for personal guarantees since 2008, which the company says is in response to market trends.
Axa and Aegon say they do not use personal guarantees but continue to review this position.
P3 Wealth Management managing director Frank O’Donnell says: “If it was the case that advisers would get paid a much higher rate for accepting higher risk, then perhaps I would agree to a personal guarantee but who is going to take on the risk without a reward?”