View more on these topics

Rob Reid: Beware providers taking advantage

Rob Reid glasses 150

You may recall that in a recent news article I argued that Standard Life should not be mailing clients, I have since had a direct response from the company using the get of jail card of ‘we need to do this under our treating customers fairly obligations’.

Now it appears Standard wants me to prove we are still advising a GPP we have looked after for over 10 years and if we can not, level commission is switched off. My prediction that trail commissions would only be temporary was bang on the money. Heaven help those who paid in multiples higher than one times.

Next year will see a far quicker reduction in adviser numbers than predicted so far, as models creak and break and the recent FSA paper on incentives make self-employed advisers an impossible option in any model.

So when you next get a revised Terms of Business read the bloody thing and refuse the changes that don’t suit. After all, contracts are meant to be two sided. Providers say they want more commercial relationships but let’s make sure they are mutually commercial.

With another 139 staff leaving, can I ask Standard Life to focus on matters that directly affect it and not those impacting on others.

It is clear to me that Standard and other providers will build direct sales teams as they seek to expand market share. It is unacceptable that they do this under the cover of treating customers fairly. After all we had the expense of marketing and securing these clients in the first place.

And as we are also customers under treating customers fairly just how fairly are we being treated?

Standard and others were not built on direct offer business they were built on the efforts of advisers like you and me.

I recall when demutualisation was the discussion point Standard spouted unsubstantiated commentary that “mutual was better” yet no evidence was ever received or divulged. When the Scotsman newspaper contacted me on the topic I suggested that a series of case studies could prove the benefits that apparently flowed from mutual investment companies.

Unfortunately the headline was along the lines of “leading adviser accuses Standard Life of a lack of candour” leading to the paper being banned by the late Scott Bell (the CEO of Standard Life at that time) from Standard reception areas.

This was a slight over reaction on their part as had he read the article he would have realised I was trying to be helpful.

This poor judgement of PR reappeared with the cash account that wasn’t cash after all. Here I suggested the company determine if the higher risk had delivered a better return. If so, the risk had been corrected going forward and they had made a profit too. This was rejected in favour of one division blaming another on a conference call which had the objective of putting our minds at rest.

Now we have the move to initiate communication with IFA clients about an opaque product that is just one element of a portfolio and this is at the core of my objection. They are advising without having all of the facts, a classic case of advice out of context. This is the result of a regulator (FSA) which never understood advice, far less the planning process.

Products are tools they are not the entirety of the solution.

Having listened to Martin Wheatley at the Apfa dinner recently, I think he has a better grasp and his reference to rear mirror regulation reflected that he is getting up to speed far faster than his predecessors ever did.

Robert Reid is managing director of Syndaxi Chartered Financial Planners


News and expert analysis straight to your inbox

Sign up


There are 14 comments at the moment, we would love to hear your opinion too.

  1. And where do Standard Life expect new business to come from once RDR is up and running?

    If other providers follow their example they will find business flying out of the door to provincial SIPP providers.

  2. Concerned Adviser 29th November 2012 at 4:36 pm

    Standard will not be alone in at worst trying to wrench my clients away or at best stop remunerating me for looking after my clients. Choose your provider with care. If a provider has got a direct salesforce then expect them to make moves to call your clients their clients. The number of those without is shrinking but there’s some. Not the first time, nor the last time, you’ll have heard the warning.

  3. I have long considered Standard Life to be unethical in its dealings with clients and advisers. They once openly tried to poach one of my clients which happened to be me (I am my own long qualified adviser). Not only unethical but incompetent.

    Regarding the cash account which was not cash, SL were heavily fined and paid considerable compensation over this. I read through their end of year accounts and found minimal reference to this and when I queried this was told that it had clearly been shown. They considered a half sentence in a 100 page plus document to be clear disclosure. As far as I am aware no one’s head had rolled and their top investment man receievd a £5m bonus despite speaking out against such bonuses for bank directors.

    At this stage I ceased to have any further dealings with Standard Life.

  4. “So when you next get a revised Terms of Business read the bloody thing, and refuse the changes that don’t suit after all contracts are meant to be two sided providers say they want more commercial relationships let’s make sure they are mutually commercial.”

    I enjoy Ramblin’ Rob Reid’s writing style up to a point, but MM’s editorial staff are just hanging him out to dry here.

    If you have ‘editor’ in your job title, your purpose in life is to not let him write paragraphs like this.

  5. I remember reading of a Bolton IFA who had a client contacted by a Scottish Widows advisor when they realised he was retiring with about a £250k pot. It’s not just Standard Life who have shown form in this area. And Widows have more than doubled their tied salesforce of late. And Lloyds Bank aren’t bothering with clients who have ‘small’ pots any more. Is it because their Widows advisors can sell to IFA clients with £250k instead?

  6. Hey guys – a sense of proportion please!

    We have been dealing with life companies for years. Have you ever come across one that can match your levels of service, client care and engagement and even expertise?

    Sure some of your more feckless clients may initially be lost to these numpties, but how long before they come running back? I have always tried to be as obsequious as possible to a departing client (Both a very rare occurrence for me – being obsequious and losing a client!) I always write saying that if there is anything I can do to facilitate a smooth transition and if you have any problem, feel free… etc. Truth to tell I don’t lose ‘em for long.

  7. And watch DFMs too. I have introduced clients to DFMs who are a little over grateful for the intro and go in directly to see them offering their other additional services behind my back. In one case I lost the wealthy client entirely to them and regretted introducing him to a firm who turned out to have a very greedy snake oil salesman in a rather nice suit with a great presence and a plummy voice but no ethics and an expensive service.

  8. Becoming a headcase IFA 30th November 2012 at 7:21 am

    @ arthur
    Yes Arthur, I too lost a wealthy client to one of the better known and biggest DFM/IFA companies. They were telling me one thing and doing another. Unfortunately that particular client was quite easily impressed by the nice new offices and liked the idea of dealing with another woman (who left the company about two months later).

  9. I remember reading the article re widows and the customer with 250k. Sure the story mentioned that the customer hadn’t spoken to the ifa for a number of years? Is the pension provider not therefore working in the customers best interests to help then into retirement? Or should they wilfully neglect the client?

  10. As a Standard Life employee, I’m totally behind the recent decisions taken by the company. The decisions have not been taken to steal clients from advisers or turn off all commission, but rather to pinpoint instances where customers are no longer being serviced properly and to rectify that.

    The recent mailing to with-profit customers was taken on the back of research showing that very few of the customers were aware that they had valuable guarantees on their products. Thus it’s our duty (since they are customers of us) to make them aware of the value in their current products. We aren’t trying to steal clients from advisers, we are trying to make sure that the ones who are not properly advised know exactly what they have with us.

    Regarding trail commission, why would we possibly want to keep paying commission to an adviser who no longer has any interest in their client? We have found instances on our systems of clients who haven’t spoken to their adviser for 10 years and yet we are still paying commission for “an ongoing service”. This isn’t in the customers interests (since it ultimately results in higher charges) and it isn’t in our interests, it only benefits advisers who are picking up money for no work. These are the types of commission we are trying to stop, any adviser who is in regular contact with their client and who is providing the service expected has nothing to worry about.

  11. A little reminder to some providers/advisers who think you can re-invent the wheel – 99% prospecting 1% selling (or advising if you’re pro RDR)

  12. I think the SL employee is being rather disingenuous with part of his comment. I can understand why trail commission is difficult to justify being paid to an IFA who hasn’t spoke to the client for 10 years. But stopping that payment doesn’t help the client at all – which is what the SL employee implies. In fact, the savings are just kept by SL for its shareholders….the client T&Cs remain the same.

    And on a legal point, Investment Bonds were usually offered 2 commission options for an IFA – more up front or no trail or less up front but 0.5% per annum the business remained on the books. Now many clear-thinking advisers have used the second option to offer good ongoing service to clients, but nowhere in the Terms of Business in operation at the time did they say the trail was only paid upon proof of service. Cutting off trail could result in a messy legal challenge.

    And on stuff like term insurance etc, typically 2.5% of premium was paid as renewal commission – this was basically a sales reward, and priced into the contract. Times are changing and I don’t mind that, but I don’t think SL or any other companies should seek to line their own pockets at IFAs expense by bending their own agreements after the event…the only possible way to justify this would be if the client took all the savings – which SL is clearly not facilitating.

  13. Sorry to make a double comment but I have to say I’m puzzled by Derek Gair’s comment. Personally I do no prospecting at all, as we get new clients from existing ones or from professional connection referrals.

    But even those who do advertise/prospect etc, it must only be a limited part of the business cost/time. Otherwise ,if an advisor is spending so much time looking for work, he will need to charge the few clients he does get such high fees that he will be uncompetitive.

  14. @IFA

    After 30 yrs as an Adviser, I too get 99% of business from existing clients and referrals thereof. The point I was making was that RDR and an SPS with a fee proposition will not produce a queue outside the door.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm