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Why direct approach has lost support for Standard

I am not at all surprised to read of Standard Life being slammed by advisers for taking it upon itself to write direct to their clients.

In one form or another, this has been going on for years, as I remember from exchanges between the director in charge of the department in which I worked at one of the national IFAs back in the 1980s and his opposite number at Standard’s Bristol branch. The complaint then was about Standard taking it upon itself to write direct to clients introduced to it by IFA firms about other products and services it wished to draw to their attention.

But Standard was having none of it. As far as it was concerned, any client introduced by a third party became fair game for any future direct marketing campaigns. Protests from my then boss that Standard had no right to adopt such a stance without first seeking permission cut no ice at all. What could we do about Standard’s intransigence? Nothing, really, and it knew it.

Given that clients now have the option to indicate on application forms if they do not wish to receive any unsolicited marketing material, Standard has to stop this particular practice, but I share the opinion that it should not be sending anything direct to IFA clients without first seeking permission, other than what it is obliged by regulation to do.

It is all very well for Peter Timberlake to claim that because Standard “notified” IFA firms that it would be writing to their clients direct, then IFAs have no grounds for complaint, but what he omits is any mention of what notice Standard would have taken in response to letters from IFAs indicating that they would strongly object to any such material being sent direct to their clients. None whatsoever is my guess.

Our terms of business now have to contain a box for clients to indicate if they would prefer to be excluded from any mass mailshots on new products or services. I do not think it unreasonable for IFAs to be offered the option to instruct Standard not to communicate direct with their clients for marketing purposes or any other reason.

The minimum guaranteed rate of reversionary bonus underpinning Standard’s with-profits fund should, as a matter of routine, be incorporated in its normal annual benefit statements, of which copies are sent to each client’s IFA. Why was this option not considered or taken up? Surely Standard must have realised that quite a few IFAs would object to it writing direct to their clients?

Let us cast our minds back to April 2001 when Standard, like virtually all other life offices, unilaterally converted the charging structures of all its existing personal pension contracts to stakeholder terms, with a corresponding reduction in commission. No advance notice was given that I can remember, let alone permission sought. As a result, IFAs arranging increments to Standard Life personal pensions after April 5, 2001 found themselves getting paid something like a quarter of the commission they had been expecting for such top-ups. The result? IFAs stopped proactively reviewing clients’ contributions to Standard Life personal pensions on a regular basis. Such an annual exercise had been rendered all but profitless. Thank you very much, Standard.

Whenever I receive a call from Standard’s latest broker consultant seeking to drum up new business, I state that unless it reverses the changes effected unilaterally on all the personal pensions that we wrote with it in the 1990s, there is not the slightest prospect of my recommending it for anything.

As for Standard’s guaranteed minimum reversionary bonus rates, are these really of such great value, anyway? On its original (closed) pension with-profits fund, the rate is only 4 per cent and has been no higher than this for several years now. All contributions after a certain date have been redirected into the new millennium with-profits fund, which is currently paying a dismally low 2 per cent. Hooray for with-profits (not). Both funds remain as vulnerable as they ever were to the imposition of market value reductions.

Aifa may have praised the content of Standard’s material explaining the guaranteed minimum reversionary bonus rate applicable to its now closed with-profits fund but I strongly doubt if Aifa would have approved the method of its communication.

Yet another example of a life office shooting itself in the foot through its relationship with its supporting IFAs.

Julian Stevens
Partner
Harvest IFM, Bristol

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