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The chasm between IFAs and life office reps

ADVICE

I visited some clients yesterday evening whose with-profits low-cost endowment had matured late last year, fractionally above target.

As a bonus, they had already cleared their mortgage from other resources, so a nice man from Legal & General had taken the trouble to pay
them a visit at home to deliver their cheque in person. What service, eh?

Said representative then proceeded to persuade them to reinvest as much as he could get out of them into two new L&G products, a multi-manager unit trust and a two-year cash-based bond, all without the benefit of a fact-find or anything in the way of a personalised letter of recommendation, still less any sort of attempt to establish their objectives in making these investments.

Apparently, he had leaned on them quite hard to invest more than they actually wanted to. All on his very first and one and only visit.

And the commission – 6.5 per cent on the unit trust and 4 per cent on the cash-based bond. Now, consider just what an IFA would have had to do for a similar pair of sales, what commission he would have taken and what the FSA would have to say about the absence of even a letter of
recommendation recording such fundamentals as attitude to investment risk and risk warnings. Oh yes, the FSA would probably have taken a dim view of such levels of commission as well.

Is there not a somewhat gaping chasm between these two approaches? Yet this is happening every day of the week, right under the nose of the FSA.

JULIAN STEVENS
Harvest IFM
Bristol

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian

    I understand your displeasure at what happened, however, the question has to be asked: why didn’t you get in touch with your client before now, as you must have known their endowment was due to mature last year?

    Even if you had not sold them the contract originally, as an existing client of yours, you would have been aware of this maturing plan from when you completed a fact find.

  2. Jiain MMcgowns 8th April 2010 at 3:13 pm

    Julian

    I have to side with Steve as well you should have been in their first however I don’t think you can tar all life office reps with the same brush. Having been both independent and a company direct sales rep there are responsible guys and providers out there.

    This Joker from L&G however should be strung up. Your clients should be complaining to L&G advice and sales complaints team about the heavy handed tactics, these guys are under the exact same regulatory regime and have to produce the same know your customer fact fine info, sounds like they have not done that, 3 words get you client to complain complain complain.

    It is little wonder that a whole generation of customers who don’t trust Financial Adviser miss the Man from the Pru, who built up trust over a number of years, would know your name, your family and plans inside out. Fair enough that is not financial viable but any product providers who seem intent on using less than scrupulous individuals should be made to pay, they same way we are getting hit by SCARPS levys

    To be honest I have never liked dealing with L&G, was always very poor service on poor product and with all this flim flammery going on I think my opinion was correct

  3. Anonemouse and Simon Webster are assuming a lot here. I don’t see Julian declaring he sold it, that he took over servicing or completed a fact-find previously.

    During my 25 years in the industry I have been tied to one life office, tied to a bank ‘IFA’ and all on my lonesome for most of the time (albeit in a network for safety reasons). Without exception my experience of tied advisers and bank ‘brokers’ is much the same as Julian describes, they are forearmed and forewarned to an extent that a one man band IFA is almost completely precluded from the ensuing hunt for new business.

    Life offices are desperate to keep funds in house, always have been and hence the likes of banks created by Standard Life or Scottish Widows.

    Banks know when some money hits your account and this invariably prompts a call from a highly pressurised call centre.

    There may some highly professional tied advisers but the fact that they are tied is their ultimate downfall and leads to ‘customer’ detriment. That is why they end up as IFAs, a ‘dying breed’ as one former FSA director described them.

    A crying shame.

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