The financial services industry is continuing to profiteer from legacy clients in a way which would be considered unacceptable in any other sector, according to Nucleus.
Speaking at a Perspective roundtable in London last week, Nucleus chief executive David Ferguson said fund managers, platforms and life offices all have large numbers of legacy customers paying charges which are much higher than those paid by new customers.
He said: “Big life companies need to realise the way they treat legacy clients is really not that great. If that was British Gas, and it charged old customers this way, the company would be on the News at 10 every night of the week.”
Ferguson argued it is “so disingenuous” for the industry to be selling transparent new products post-RDR while still making money off older-style products.
He added: “This industry is engaging with millions of people and most are still getting a raw deal somewhere down the line from what they bought before. Until someone has the courage to break that cycle, we will always have that issue.”
But Scottish Widows head of distribution development Robert Kerr disputed Ferguson’s claims, saying: “If you step back 10 years ago, then there would probably be some valid arguments in what you are saying. But the reality is the industry has moved on.
“There are not that many legacy contracts still in place with really high charges. If you look at most providers’ books, and the lapses they have taken over the last five years, most of that business has flushed through. The proportion of in-house managed funds is much smaller as well.
“The industry has learned some lessons and I do not think it is as black and white as all that anymore. Customer engagement is improving.”