Adviser charging post RDR has been a hot topic for some time and was recently taken to the next level following the publication of the FSA’s latest quarterly consultation paper. Many in the Protection side of the industry seems to feel that the great adviser charging debate doesn’t apply to them because commission will remain, yet the vast majority of advisers selling, sorry, ‘advising’ on protection solutions do so as part of a holistic proposition, so are of course affected.
Regardless of RDR compliance, there is an increasing demand for transparency of remuneration and clarity of services from consumers so either way, advisers across all sectors are having to review and refine their charging and service models.
I was recently discussing these points with Protection Review chief executive Kevin Carr and the thus far overlooked issue of remuneration relating to protection claims occupied our thoughts.
I have said before that in terms of job satisfaction and sense-of-worth, helping a client say; buy their first home, facilitate effective education for their children or secure a comfortable retirement simply pales into insignificance when compared with witnessing a protection policy I put in place pay-out and provide financial security at a time when my client’s world is falling apart. Without a second thought I can say that this is such an emotive and emotional experience that the thought of remuneration doesn’t come into it.
Unless you have experienced the traumatic phone call from a client with the heart-sinking news that they or their partner have been diagnosed with something horrendous then I won’t begin to try and explain how it feels because I will not do the sentiments justice. How can you put a price on the assistance we provide at times like this?
I’m certain that this is the same for most advisers. The initial commission received on commencement of the policy would have been seen as payment for providing advice, research, processing and if necessary, claim support. Or would it? Surely making a charge for claims support when commission was already taken at outset would be abhorrent for most advisers, wouldn’t it?
Even if the policy was set-up years ago, for most firms there is likely to be some form of on-going relationship and service, albeit maybe a distant one. But would not charging mean cross-subsidy has taken place?
Maybe if the request for assistance was from someone that the adviser or firm had no previous relationship with then there is no sense of moral obligation, but I doubt this is a common occurrence.
So this begs the question; if cross-subsidy is forbidden and once all services have become costed-out and transparently remunerated, how do advisers and indeed should advisers make an explicit charge for handling protection claims?
Plan Money director Peter Chadborn