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Skipton scraps charges rebate after £11.3m bill


Skipton Building Society has scrapped its underperformance rebate for 39,000 investment advice clients after privately admitting the rebate was too expensive at a cost of £11.3m.

Skipton has told clients the feature has been withdrawn because it is unpopular.

The rebate was originally offered as part of a proposition with Skipton Financial Services called Monitored Informed Investing.

Skipton Financial Services was rolled into its Skipton Building Society parent last summer.

The rebate was a guarantee that, if clients’ MII investments underperformed against the sector average, Skipton would pay the clients’ annual 0.75 per cent ongoing charge back until performance improved.

Money Marketing sister title Mortgage Strategy understands Skipton has between £2bn and £3bn invested through the scheme.

Skipton announced it was ending the MII rebate from 1 January 2017 in a letter to its 39,000 investors on 12 December.

An unpopular option?

In the letter, Skipton says the rebate option was being pulled because it was unpopular.

The letter says: “Following customer research we have found this is one of the least valued MII features, and so we have made the decision to no longer offer it.”

But an internal Skipton email from December, seen by Mortgage Strategy, says the rebate was being scrapped because it was expensive, costing Skipton £11.3m since the launch of MII.

The email, written by Skipton Building Society director of financial advice Matthew Leach, says  customers “appreciate the rebate”, though not as much as services like fund switching, and that the firm is withdrawing the rebate due to its expense.

It says: “As we have been considering for a significant period of time and as we have communicated at adviser roadshows, including the most recent set in October and through business update briefings, we have been reviewing the MII service especially surrounding the underperformance reimbursement/waiver.

“We have explained due to how this is structured it has sometimes proven very difficult to predict how and when this feature will have an impact and therefore causes many challenges surrounding planning for it as well as planning for future investment in the business and our proposition.”

A Skipton spokeswoman says: “We continually review our product offering to ensure they best meet the needs of our customers and our wider membership. Since 2009 we’ve issued 25,000 questionnaires about MII.

“The questionnaires specifically ask customers about each of the MII features with the overall response showing the underperformance reimbursement to be one of the lowest they rank. This recent and significant direct feedback from MII customers has understandably been a factor in our decision to withdraw this feature, and due to the removal of this feature, we have actively reduced the ongoing charge for existing customers.”

The ongoing charge is now 0.72 per cent.

Client feedback

Skipton declined to share the latest MII satisfaction figures.

But a Skipton sales brochure called “What our clients think about MII and SFS” says 87 per cent of SFS clients thought the underperformance rebate was a “very good or excellent” feature of MII between July 2009 and February 2011.

The only feature to get a lower ranking was the MII’s online facility, which was still valued by 78 per cent of customers.

Skipton first launched MII in July 2009.

In 2013, Skipton’s financial advice division set aside £5.6m for commission rebates for fund underperformance and customer redress relating to a past business review.

Skipton said its financial advice division, which then included Skipton Financial Services, incurred charges of £3.3m in 2012 for commission rebates.



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. ‘Unpopular’ 🙂

  2. Stuart Rathbone 4th January 2017 at 3:19 pm

    “Paging Paul Lewis, Paging Paul Lewis”

    Best laugh I have had in years.

    Made my year already

  3. I’m guessing it’s unpopular with Skipton Management. Another example of “Here’s what we’ll give you until we decide to take it back” which is the same game banks & building societies have been playing for 100’s of years.

  4. This is outrageous ! I hope the FCA and the nationals get hold of this.

  5. It is even worse than the article shows. I have looked back at Skipton official quotes in MM previously.
    7th March 2013- ‘it incurred charges of £3.3m in commission rebates’. This must have been from the Rebate they have now scrapped. It goes onto to say, A Skipton spokesperson says ‘Because the promises (LOL) under monitored informed investing are of genuine value to customers, they can result in significant cost to the business. Nevertheless, Skipton Financial Services REMAINS COMMITTED TO OFFERING MII’.
    6th March 2014- ‘The results show that SFS set aside £1m last year under its Monitored Informed Investing proposition, whereby customers are offered a refund of ongoing charges if a fund underperforms against its peers’. The next part is the biggest part. A spokesperson for Skipton says ‘these rebate promises are part of SFS’s ongoing service proposition to help investors and are EXTREMELY WELL RECEIVED received by clients’ !!!!
    4th Jan 2016- They write to 39,000 customers and their rationale for removing this rebate is, ‘in the letter Skipton says the rebate option was being pulled because it was unpopular’. The letter says ‘following customer research we have found this is one of the least valued MII features, and so we have made the decision to no longer offer it’.

    This Matthew Leach character or somebody above him should resign immediately.

  6. Perhaps Skipton should be encouraged to tell each client what the value of the rebate was, in monetary terms, like we are encouraged to do with our own fee propositions. “How much do you value your £1,000 p.a. rebate?” sounds a lot more attractive than “How much do you value your 0.75% rebate?”

  7. And the Chairman of the Board is the former Finance and Risk Director of HBOS – Mike Ellis. Says it all really.

  8. I’m an IFA and have come across 5 SBS MII customers in the last few years, 2 in the last couple of months. Each customer was very unhappy with SBS MII due to their under performing funds and lack of face to face reviews ,after they had been sold the ‘promises’ (that is what the sales brochure said) of MII.
    The SBS brochure said they offer contracted face to face reviews ever 6 months for 500k, you need 250k to 500k for a review each year, 100k to 250k every 2 years, 50k to 100k every 3 years and 20k to 50k every 5 years. Has anybody come across so few reviews for a 0.75% per annum fee ? I also found out the above was on the original investment. My latest SBS client had 350k and hadn’t been reviewed for 3 years. When I explained I would review all these clients twice per year they all moved to me and now pay a lot less costs for a much better service.
    With regards to the removal of the Rebate, Skipton’s Financial advice strapline on their website is ‘ Trusted and Clear Advice’. Whoever is in charge of this business has no idea about what a quality service for clients really means.

  9. Considering I only earn just over the minimum wage working for SBS, and had a financial adviser telling me that he had qualified for a holiday to a 5 star resort next year with his family, it makes you wonder do these people have any morals at all!

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