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Rob Reid: Where did it all go wrong between us and Friends?


September is my time for reflection as I contemplate the run-in to the end of the year. It’s prompted by September being the month in which my parents passed away, several years apart.

Reflecting on what’s working and what isn’t is vital if your objective is to move forward positively. The reality of the RDR is now percolating through the minds of the industry, for those who thought adviser charging meant commission (i.e. label change only), the reality is beginning to dawn.

Friends Life recently sent us a retirement pack where unlike pre-RDR packs, no commission (sorry – adviser charge) was assumed. Just as we prepped the options letter to our client, Friends Life called us to request information about the aforementioned client. What information did they seek to elicit from us? The client’s telephone number.

Now the client may have contacted Friends directly to request information but any further communication should have been through ourselves.

This is a new take on client acquisition, where providers expect us not just to keep out of the way, but to remain as a source of information. Naturally, one of my team sent them packing, empty-handed and with a flea in their ear.

Friends Life seems to have abandoned the IFA market, or at least developed a PR and communications strategy that is taking them down that road at a rate of knots.

I recall speaking at a workshop where a member of Friends Life’s senior management spoke of their “clients”.

Last time I checked, they had not popped any money into our account to cover the development/servicing of the client.  

The fact that some of the senior personnel in life companies actually believe that policyholders are clients explains the crazy valuations currently placed on them by analysts in the same daft place as the senior personnel. TCF has never quite made it into the culture of many of the UK’s providers – luckily, I think the new regulator sees TCF being for all, not just for us advisers.

Looking back Friends Life was ahead of the game in the 80’s and 90’s. Its ability to process business electronically via GLADIS (their system) was impressive. I recall dropping off a proposal and picking up the policy later that day – I could have had an as-you-wait service but I had clients to see.

The question is: where did it go wrong? Why have they decided that they can assume control of part of my client bank without my permission or, more importantly, without the permission of the client, either?

Just prior to RDR we received the advice that evidence of no service would suspend renewal commission. Now, there was a host of conditions attached, but call centres are not staffed with pragmatists, so a battle between switching off and switching on was sure to follow.

A while ago I used a slide in a presentation discussing the upcoming RDR which was headed ’small numbers big problem”. The small numbers were the under-£1 payments of renewal commission, and the big problem occurs when each of these small payments are stopped till proof of service is forthcoming.

Clearly the cost of recovery of individual payments far exceeds the amount sought, and that’s why those who bought books of renewal commission are now finding out the risk that comes with assumptions.

However, the concept that the insurer can cite systems costs as the barrier to passing it on to the clients doesn’t hold water. That’s a free piece of IT consultancy. For those that know me, this is a not to be repeated offer. It’s simple: give them all agencies, then simply rebate into their account. Job done.

The demise of consultancy charging has now snared the group scheme commission that many thought they had stored up as a hedge post-RDR. The providers don’t want to pay commissions anymore – Adviser charging is a pain, so more change is coming. Let’s be better prepared.

I recently attended an FCA positive compliance workshop where the presenters were informative and wanted to help us, not to catch us. For me this is a major sign of the change in direction towards proactive help to avoid problems, instead of mopping up in the most uneconomic way, as was true under the FSA.

There is evidence through courses like this that the regulator seeks a real partnership, and wants to avoid the “us and them” so prevalent since the days of the PIA.

Let’s take the opportunity, and if you should take the chance to go on one of the Positive Compliance courses I’d recommend them. THe one I was on was run by two Glaswegians who exude the positivity so sorely lacking, before telling us what was expected of us and not just what was unacceptable.

As I return to my reflective state, I recall that my parents also stressed the importance of looking forward, and not looking back. For that I am forever in their debt.

Robert Reid is managing director at Syndaxi Chartered Financial Planners



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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Very good points by Rob well made. Friends used to be a good company on so many fronts but really seem to have lost their way. Their credibility with the IFA market must be at an all-time low.

    It is hard to imagine that increasing numbers of advisers are not looking at any client investments they advised on with Friends or indeed any investments with Friends even if they did not arrange them and asking, could I get a better return for my clients by moving the money elsewhere? The FCA has identified clear guidelines on how advisers can take such action in a compliant fashion. I fear Friends have put themselves top of the list for such scrutiny.

    I wonder how long it will be before we see adviser advertising on the basis that if you have assets with a closed book life company (which part of Friends clearly effectively is) you should consider moving them. This is an issue for any closed book provider but probably even more so in the light of the latest trends in the corporate pensions market.

    One very large corporate adviser was talking to me yesterday about how they interpret some of the latest guidance from the OFT, essentially that they want to see corporate pension schemes reviewed and moved on a regular basis, it is hard not to conclude that Friends AUM will collapse over the next couple of years. A great shame, I hope they do something to restore credibility before it becomes too late although I fear it already may have reached that stage?

  2. As far as the “product” is concerned they are the clients of Friends and it seems reasonable for them to want to give advice regarding their own product.

    I agree RDR has changed everything. The umbilical cord still needs to be cut between provider and adviser. Advisers give advice. They do not own clients. If a provider wants to compete so what ? The client will have to decide who they trust.

  3. Q. “Where did it all go wrong between us and Friends?”

    A. When they were acquired by a Vulture Fund.

  4. Robert. Just read your article and received notification from AXA PPP in the post this morning asking me to sign revised Terms of Business “in order for our commercial relationship to continue uninterrupted” yet clause 2.5 states “Where a policy is Concluded by AXA PPP at a time when the intermediary is not acting as teh Client’s agent AXA PPP will not accept a request by the Client or Intermediary, to appoint the Intermediary to such policy. For teh avoidance of doubt, in such cases, AXA PPP will not deal with the Intermediary in relation to the Policy.”

    Clause 2.7 “In entering into these Terms of Business, AXA PPP does not undertake to accept business from the Intermediary or any of its APpointed Representatives and reserves the right at its discretion to refuse any such business without giving a reason”

    Haven’t read any further but appears as though AXA PPP do not want to continue working with advisers (IFA or Restricted).

    How many more companies will continue to act using RDR as an excuse to cut out intermediaries?

    Legacy commissions will come to an end irrespective of the rights or wrongs of doing so and contractual terms with life assurers pocketing the extra income.

    How short sighted of the life industry.

  5. Bones – you wrote on 23rd Sept “as an investor I object to the term “orphaned client.I do not belong and never have belonged to any adviser, platform of provider”
    In this case also Friends do not have a client but just an investor/policyholder. Look up ‘client’ in the dictionary.
    Robert does have a client relationship.
    It might seem reasonable for a product provider to want to seek contact with a customer but to phone the introducer for information with the intention of competing for any subsequent new business is naive at best, and a clear indication they have changed their relationship with Advisers to one of introducer only.

  6. Agree with Harry, a terrible shame – a once great Provider

  7. Bones, the client is a policyholder if your asertion had any substance in it then what about the cleints were we have multiple wrappers the providers dont offer holistic advice.
    No one owns the clients but a little respect would go along way and Friends need to stop acting as commercial pickpockets

  8. @ Griz – quite right – I explained myself badly. As a client I don’t belong to anyone. so perhaps I should have written “As far as the “product” is concerned it seems reasonable for them to want to give advice regarding their own product.” As a client I will decide who I want to deal with, not the adviser , nor the provider.

    I still hold the view that Advisers are wrong to think that only they should be giving advice to “their” client.

    @ Robert – Sorry don’t follow “the client is a policyholder if your asertion had any substance in it then what about the cleints were we have multiple wrappers the providers dont offer holistic advice.”

    I’m not arguing that they would give better advice – that is for the client to decide – merely that it is to be expected and certainly that this is the way it will be more and more in the future. I have never accepted the notion of IFA supporting companies and now RDR makes this near impossible.

  9. Fox in the Coup 3rd October 2013 at 6:11 pm

    Interesting food for thought here.

    Two observations. Firstly, given the severing of the provider/intermediary ‘arrangement’, are providers not entitled to view your client a little differently? If I introduce you to an accountant, a solicitor, a dentist or an architect then you become their client too don’t you?

    Secondly, and more seriously, I think the FCA would disagree with the notion that the policyholder isn’t a client of the provider. By the FCA Handbook definition they most definitely are clients. Indeed, it has been reported recently that the FCA has asked asset managers to go further. The head of distribution of an asset manager was recently quoted as saying that the FCA told them they must have a D2C strategy and I quote, “We have been told there is no option here and we can’t say that we don’t want business-to-consumer business because IFAs have introduced clients to us and we have to service them.”

  10. Hi Fox. I feel like a headless chicken here !
    Are you saying the database of ‘clients’ held by Providers is now a client base for direct sales ?
    What is your definition of servicing the client, that you would need their phone number ?

  11. Fox in the Coup 4th October 2013 at 9:56 am

    I’m just quoting on the second part but I don’t think it means they have to sell to them. What I think it means is that they must be treated as clients and serviced as such. How each provider interprets that is up to them but if they are clients it doesn’t seem unreasonable for them to have a phone number. It’s your client too and you expect to have a phone number…

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