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‘Scandalous’ and ‘obscene’: Advisers react to Standard Life commission cull

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Standard Life Investment’s decision to stop all trail commission payments on mutual funds is “scandalous” and “obscene”, say advisers.

This morning Money Marketing revealed Standard Life Investments will cease payments to align new and legacy business “reflecting the spirit of the Retail Distribution Review”.

But advisers say the move – which will see charges fall, but not by the same level as the commission – is an excuse to “pocket the difference”.

Rowley Turton director Scott Gallacher says: “This is another example of Standard Life stealing commission from advisers.

“They’ve acquired assets presumably through advisers with terms of business but now they’re effectively ripping up the contract with advisers, not even rebating all that money to clients.”

He adds: “This is not platform money, it’s disingenuous to quote PS13/1 which has nothing to do with advisers, I think it’s scandalous.”

Annual management charges are typically being cut by around 20bps.

Currently, renewal commission on bond-type funds is 25bps and 50bps on equity-type funds.

Bph Wealth Management partner Adam Bell says: “This will happen more and more, which is no bad thing, really everything should be on explicit fees.

“If they dropped everything by 50bps that would be fine, but to drop it by a little bit and pocket the difference is just laughable.”

He adds: “I think it’s quite obscene Standard Life are saying this is in line with the concept of RDR when they are pocketing the difference.”

Syndaxi Financial Planning director Rob Reid says: “I’m not at all surprised, I’m mystified why anyone would think Standard Life would do anything else.

“They are the first, they will not be the last.”

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Comments

There are 19 comments at the moment, we would love to hear your opinion too.

  1. TCF anyone? Will we see another back tracking exercise in due course?

  2. You can’t change the past but you can certainly change the future!!

  3. AS I said before (MM seems to love repeating themselves).

    Will this mean charges to the clients reduce? I’ll not hold my breath. Standard Life? Scandalous Life more like. Anyway what’s with the Life ‘bit’? There’s no life in Standard, nor it would seem are there any standards. I think a re-name would be appropriate. Suggestions on a postcard.

    • Depends. On a fund charging 1.5% now it only drops to 1.3% so if the adviser can find a way to collect his 0.5% then the client will be paying more. Could of course buy the same fund from a platform ( ATS for example) and pay only 0.75% pa so provided the platform charges less than 0.25% pa and the adviser no more than 0.5% the client could break- even.

  4. Thieving b##tards would seem quite apt!

  5. Subsequently, I’ve had a long conversation with their Head of Wholesale Sales about this. He states that only a certain proportion of the total funds under management were actually paying fund based commission, which is why it’s not a like for like reduction, and he assured me they haven’t actually ended up in profit out of it. Now if they’d said that in the first place and actually put some specific figures showing how they’d arrived at the overall reductions, it wouldn’t have looked so bad. Regardless, it’s a PR disaster from a reputation point of view.

  6. A typical accountants decision to produce immediate benefit on profits with no longer term outlook on the effect on business. I stopped dealing with them 10 years ago.

  7. This whole thing is getting out of hand! Companies ride roughshod through contracts and make up rules on the basis of “the spirit of RDR” or “its what the FCA expect” type basis. Over the years we had around 30 IFAs working for us and all but one have departed. They left behind many clients which had been recommended policies on a 3 + 1/2 basis rather than full initial. These clients were not promised anything and they may have received very little contact from us over the past few years. Nevertheless, I have to pay high PI costs to cover this advice for the past 20 years and the odd £1 a month we might receive goes a little way to helping meet these costs. In the event of a complaint, we would get no contribution from our departed IFAs and would have to meet the costs ourselves. If Life companies wish to cease paying trail, then they should pick up the complaints bill but then again pigs might fly!
    It is just impossible to write this stuff and equally impossible to write a business plan!

  8. Boycott Standard life – I Did long ago !!

  9. Richard Wright ~ Ditto. April 2001 to be exact (along with all the other trad. life offices who screwed us by unilaterally stakeholdering all the pensions business they’d been very glad to receive from us over the preceding many years. They didn’t even give us any advance warning, let alone asking our permission.

    But then, as long ago as the 80’s they were writing direct to advisers’ clients, on the basis that those clients were as much theirs as those of the adviser firm that had recommended a Standard Life product. My then boss protested loudly and was told in reply: “Well what are you going to do about it?”

    I won’t use them for anything..

  10. Stuff the lifecos – never trust ’em. They all secretly hanker for the days of the direct sales force when they could train people up just sufficiently so as to sell cr4p by the bucket load. I’ve been using platforms for years and aren’t I glad. We long ago moved all our clients to clean-class shares. Standard do nothing we can’t get elsewhere. I’m waiting with baited breath though to hear the FCA’s excuses for not forcing them to rebate in full the savings to the clients instead of pocketing the difference as we know they will.

  11. And how are firms supposed to pay infinite PI insurance when the FOS do not respect the 15 year Longstop. No ongoing payment for F-pack fees and PI, then no ongoing protection should be provided other than under common law, which is 6 & 3yr timebars with a 15 longstop. This is complete madness and the F-pack need to respect the longstop by the date these companies (starting with Std Life) start doing this as the only people who have no rights otherwise appear to be advisers.
    Now do those of you who thought the longstop wasn’t an issue and that it needed to be sorted by the time the RDR came in wasn’t something we ALL needed to be shouting about well before 2013. Now do some of you realize why I put it in my contracts pre RDR and argued with the FSA and then the FSA that they could not tell us to remove mention of it from our contracts. Some of us could see the writing on the wall with companies like Std Life leaving us with nothing to pay the infinite liability and PI costs.
    Come on APFA, I am supposed to be on your Longstop working party and the F-pack are being allowed to prevaricate still. Time to sort this out once and for all. L&G were talking about strike action. How about we all just down tools from next Friday until 4th January.

  12. On the basis that this excludes bond commissions where a contractual basis of commission was agreed from outset of the business, in return for sacrificing up-front remuneration (please correct me if wrong), this leaves a) premium renewals on ongoing policies, which may be quite small on a case by case basis, but significant to SLI overall {interesting abbreviation} and b) renewals on collectives. To an adviser, the change in approach means possibly losing commissions for a) where no active contact is taking place and also realigning or losing commission for b), the latter being a bigger likely source of remuneration.

    If an active servicing relationship exists for b) then this is navigable, albeit a nuisance.

    However (and this is where I would suggest that the FCA need to be all over this, if their concerns about the advice gap are genuine), if ongoing remuneration on a policy ceases, then servicing or ongoing advice of any nature will as well (unless paid for under the new RDR terms and rates, which are likely to be far greater than the renewal was… certainly not a favourable process for the client to have to deal with, it’s far to say. Gone will be the ‘Steve, can you help me with….’ discussions, based on the small element of renewal commission one might receive on a SLI policy, no, these clients now become a part of the advice gap if they don’t pay the new charges… One thing is for sure, SLI won’t be able to advise them.

    Well done SLI and good luck with your new business model.

  13. Likewise I stopped many many years ago.It would be interesting to find who exactly does still recommend them as I can’t ever recall meeting another adviser who has placed biz with them over the past 25 years

  14. Christopher Wicks 11th December 2015 at 10:16 am

    Leopards don’t change their spots. Forget them. Use low cost passive a & trackers and concentrate on using an evidence rather than marketing hype based approach to portfolio management. Funds from 9bps, total portfolio circa 30bps. Why would you give client money to thriving ineffectual b….ds such as Std Life??

  15. Living the Dream Dream ..... 12th December 2015 at 9:19 am

    To say “I’m not surprised” or “I told you so” would be the understatement of the new millennium. I feel for my old industry colleagues who I keft behind when I was ‘advising’ you all to take advantage of the high values of your businesses and sell them …… I did and am living the early retirement dream in sunny southern Spain . Keeping up to speed with the industry through forums like MM sure does make my cafe con leche taste so much sweeter every morning.
    Seriously, I wish you all so much luck in your continuous and arduous fighting against these obscene companies, unfair regulator and pathetic APFA.

  16. When they failed to treat me and my wife fairly re an endowment I told them at the time that I was an IFA and I could not recommend them to my clients. I could not expose my clients to that sort of treatment. Their illegal action doesn’t surprise me.

  17. Given SL’s history, is another way to try and screw the client, really that surprising?

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