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Sun Life Financial to axe future trail commission

Sun Life Financial 480

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.”


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. 1st of many to do this?

  2. Dominic Thomas 20th July 2012 at 2:59 pm

    Frankly, I think they have done the right thing by advisers. Surely there cannot be much trail from their very tired old products? They have been honest about their unwillingness to pay past 2012, I imagine that many firms will find their commission payments in January to be a little on the light and late side and Providers will be having to explain or appologise. More to come? I did like the “death, so we’re parting” clause. What a shame we cannot introduce this to our Terms of Business /long stop yet…

  3. David Cockling 20th July 2012 at 3:05 pm

    Simplification, more likely using RDR as an excuse to cut future liabilities.

    Even if the payment is fair, It is potentially not treating the customer fairly. A fundamental reason for trail is to compenstate the adviser who is servicing the contract and its owner. If a one off payment is made to one adviser and the client moves to another, the trail is no longer available to help offset the fees for the new adviser. Unless it is non-detrimental to move the funds, the customer loses.

  4. Anthony Rafferty 20th July 2012 at 3:11 pm

    I think this makes sense and advisers shouldn’t have many complaints – a bird in the hand and all that. Will be interesting to see the back book disappear once the payments have been made!

  5. Michelle Airey 20th July 2012 at 3:20 pm

    We’ve had a couple of letters this week. Unfortunately they do not detail to which clients the amounts refer so on this basis we can’t allocate them fairly and appropriately. Couldn’t really be less RDR friendly!

    It seems that the ‘powers that be’ really didn’t consider these letters or the information in them when they were sent out before they sent them out on mass and their call centre staff, poor things, sound really hacked off!

  6. Presumably Sun Life will apply the saving by reducing the clients policy charges???. Otherwise they cannot be seen to be treating customers fairly.

  7. martyn sinclair 20th July 2012 at 3:58 pm

    Do advisors need to pass this cost on to clients as part of RDR. After all, part of the FSA requirements for RDR is that all clients are charged fairly?

    I have no issue witht the actions of SLF, but I think they need to explain that commissions they are stopping, should now be paid directly by the clients, if the clients still want service.

  8. Peter Fisher, spot on. If charges to customers are reduced accordingly, perfectly okay. If not, then it’s a botched job and the clients are being treated badly.

  9. We had so few clients involved, it was definately an appropriate course of action for all concerned as the administration costs for all parties of allocating to a particular clients advice account exceeded the value of doing so for the clients. Better for SLOC, us as advisers and for the clients too in my case.
    I look forward to my firms massive check for £90.
    Can I suggest some other companies for whom this would be a good move for all parties concerned?
    Even better, what about all firms being required to give advisory firms the option in 2013 of doing this for any or all of the clients on their agencies?
    I can see pros and cons of this approach, but compared to “consoldator” IFA firms, this actually looks like it could be fairer to a lot of parties, especially advisers who intend retiring as at 1st January 2013.

  10. Prolific Insurance did this many years ago, and only paid 3 times, so looks very fair to me, assuming 4.5 times. As I’m not continuing after 2012, that deal would suit me nicely. If the big companies do it, and the amounts are substantial, any ideas on how to pay as little tax on it as possible!

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