View more on these topics

Sheriar Bradbury: The worrying trend in provider agency agreements

A lack of notice period for agency agreements leaves financial advisers vulnerable to a change of direction from product providers.

Sheriar-Bradbury-MM-Peach-700.jpg

Ask any financial adviser what notice period their product providers have in place for agency agreements and I’m pretty sure not many would say “no notice period”. 

To have a notice period in any agreement – be it a job, tenancy, or insurance product – is deemed standard practice in 2013.  So you can imagine my alarm at discovering this is indeed not the case for many of the large providers.

For example, Standard Life, Sipp Centre and Aviva all have a ‘no notice required’ clause in their agency agreement terms and conditions, meaning they are in a position to terminate their contract with a financial adviser at the drop of a hat.

This worrying trend prompted me to carry out further inspection, from which I discovered that Nucleus and Transact do not state a notice period – leading me to assume no notice is required – while Fidelity operates with just 28 days and Skandia 30 days. Only Axa Elevate and Ascentric specify three months notice.

The scandals, mistrust and confusion which has marred the financial services industry rightly prompted the regulator to pledge its commitment to increasing transparency and fairness across the market. However, in its drive to protect the consumer and restore trust in the sector, certain other aspects have been overlooked.

At present the power lies with the large product providers but greater protection is needed for financial advisers to ensure their clients’ interests are safe guarded.

What is there to stop providers deciding they would rather not work with certain financial advisers and terminating the contract from one day to the next?

Large providers have huge financial commitments to financial advisers, often having to fork out substantial sums of money in ongoing commission and fees. At a time when the industry is forced to keep a close eye on balance sheets, I suspect we will see a move among providers to cut costs. Regular premium renewal and trail commission have already been thrust into the spotlight, with many providers willing to switch off these commissions where they feel the adviser has not provided adequate service to the client to justify this payment and I fear it could go one step further.

There is nothing contractually to prevent providers from taking matters into their own hands and deciding to work directly with the client, thereby cutting out the financial adviser as the middle man. This kind of strategy could be resisted with respect to those client/adviser relationships that are strong but not where the adviser has had little contact with the person for some time.

While I imagine providers would be reluctant to cut ties with the larger, more influential financial advisers, they may not have such qualms when it comes to the much smaller operators who they may well deem as too much of a hassle and an administrative headache to bother with. Already, providers are engaged in telesales operations to discover the level of adviser contact in order to determine whether ongoing payments of renewal commission should be stopped.

It is undoubtedly worrying for very small financial advisers knowing they are at the mercy of the providers who are in the envious position of being able to pick and choose who they wish to work with.

If a provider were to choose to terminate the agreement with no notice given, advisers would seriously struggle to service their clients and ultimately, it would be the consumer who suffers, going against the very principles of Treating Customers Fairly.

I would urge advisers to look at their notice periods as they need to be aware of what could happen and put provisions in place in the event an agreement is terminated.

Sheriar Bradbury is managing director of Bradbury Hamilton  

Recommended

Greg-Stark-700.jpg

Russell sets out restricted plans for On-line Partnership

Global asset manager Russell Investments has outlined restricted advice plans based around its multi-asset portfolios after acquiring the parent company of the In-Partnership and Whitechurch networks. Russell Investments, which has over £152bn in assets under management, has acquired the On-line Partnership Group for an undisclosed sum. The IFA group is made up of 600 advisers, two […]

Lee-Robertson-MM-Peach-700.png
6

Why one adviser is demanding action on military pensions

This is a personal blog and I should declare that I am an ex-serviceman although have not been impacted in any way by what I am about to discuss. I understand that not everyone is close to the military or feels quite the same way I do. However, I hope you will bear with me […]

Five ways to invest in the connected world

Smart utility metering; fitness trackers; connected cars; smart factories; precision agriculture: the internet of things encompasses myriad applications. But how do you gain exposure – and profit – from this growing trend, asks Neptune fund manager & CTO Ali Unwin. Read more: Important information Investment risks Neptune funds may have a high historic volatility rating […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Basically, what you are saying is that any financial adviser that is paid through a product and not direct by his/her client is at a significant risk.

    I would completely agree. If you allow a provider to pay your wages because it’s easier to get a client to sign for this then there is no point in weeping when the provider decides that it can save that payment.

    It’s a big bad world out there. Get used to it.

Leave a comment

Close

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

Email: customerservices@moneymarketing.com