Sun Life Financial of Canada will stop paying advisers commission on existing business from next year following a review of its closed book of business.
The company, which closed to new business in the UK in December 2010, has written to advisers this week informing them of the move.
Advisers have been offered a non-negotiable lump sum in lieu of future commission payments.
The letter, seen by Money Marketing, says: “Sun Life Financial of Canada has recently undertaken a review of its closed book of business in preparation for the RDR.
“We have made the difficult decision that we will not pay any further commission on our policies, excluding i2Live policies, with effect from December 31, 2012. Instead we intend paying you a lump sum between January and March 2013.”
I2Live was the variable annuity product offered by the UK arm of Lincoln National Corporation, which Sun Life Financial acquired in June 2009.
The lump sum will be considered as a “full and final settlement” of all future commission due. Any monies owed to Sun Life Financial will be reduced from the lump sum.
It is based on policies remaining in force until the policy maturity, expiry or vesting date, or June 30, 2017, whichever is earlier.
Sun Life Financial says there will be no further clawback on the lump sum once it has been paid.
The letter adds: “We believe this represents the fair present value of the commission you would otherwise have received in future years.”
Advisers have also been sent an acceptance form of the lump sum payment offered, which states “I hereby irrevocably and unconditionally waive all my rights in entitlement to all future commissions, with the exception of those related to the i2Live product.”
A Sun Life Financial spokesman says: “In line with the changes which will be introduced as part of the RDR, Sun Life Financial of Canada has undertaken a review of its closed book and in order to address these changes and achieve administrative simplification will be offering to settle its commission commitments, which would be payable post-RDR, in January 2013.
“We are simply offering to vary the contract by paying the current present value of future commission early, calculated over four and a half years.”
Acceptance forms must be returned by August 28.
Highclere Financial Services partner Alan Lakey says: “Sun Life Financial is looking for closure on what might be an expensive administration task. Clearly it is not looking for new business and therefore it does not care if it upsets advisers.”
But Tower Hill Associates director John Lang says: “It is entirely reasonable to offer a lump sum in lieu of future commission, and makes things more simple administratively. It will be intriguing to see if bigger players decide to follow suit. I do not think that is likely though as they probably have too much vested in keeping advisers happy rather than being too clever.”