It is a great life when those who perpetuated a market pregnant with bias suddenly pop up and tell us we are without value in the eyes of the consumer.
I refer, of course, to the recent speech by Association of British Insurers chair and Axa UK group chief executive Paul Evans, in which he said commission paid to advisers is an “open sore” that continues to undermine confidence in the industry.
To be fair, he was referring to the insurance industry and perhaps this reflects the dawning realisation that selling direct to consumer is not as easy as many insurance company chief executives previously thought.
He then moved on to to plea for transfer without permission but with no mention of penalties being waived and charges reducing to benefit the end user.
When advisers are taken off legacy plans and the renewal commission ceases, it does not benefit the client. Instead it remains with the provider. This is not impossible to fix nor is it impossible to offer the terms on existing plans.
Legacy plans were designed with the remuneration of the adviser and the profit of the provider in mind. The position of the end client was rarely thought of until a brochure was being developed. Flexible whole of life plans were a great example of this. They were not fit for purpose, given that the growth rate assumptions were hidden, as was the method of charging for life cover. We now have a steady stream of clients asking what can be done to maintain cover at a reasonable cost.
If the ABI really wants to help, then this product is one for the list. If it were possible to issue term cover with no medical details running to age 90, many would see it as a viable and attractive option. It is moves like this that win back trust far more than the pension contract upgrades.
There is clearly a fire fighting mentality at the ABI, which is never conducive to moving forward. It is better to do one or two things well than perform many tasks badly. That is a lesson it needs to learn quickly.
The ABI is stuck in the past with no strategic plan for the future. Evans had the chance to really push the regulator in a positive direction, yet all we got was deflection.
I recall interviewing the chief executive of a major provider some years ago and when I asked him where his firm would be in five years time he stated that he did not care as he would not be there. Far too many chief executives have the same view and it is that lack of forward thinking that has been the real problem. Blaming commission is a cop out; it is the lack of vision providers have meekly accepted that is the real issue.
Robert Reid is managing director at Syndaxi Chartered Financial Planners