Before IFAs are seduced by Scottish Equitable's £500,000 ad campaign
“to give IFAs the best support in the country” (Money Marketing, May 24),
they should learn from our bitter experience.
In January 1999, we promoted their marketing literature which proudly
proclaimed: “With-profits performance bond – a shining example.”
The words ring hollow now when the product enhancements, to obtain and
retain volume business, are conveniently removed by actuarial dexterity in
an amazing exercise of smoke and mirrors that would get star billing with
the Magic Circle.
On noting that the clients' terminal bonus had reduced (yes, we know it is
not guaranteed but we do not expect it to fall by 64 per cent over two
weeks), we requested a surrender quotation.
Not only had the client lost the advertised top-up bonus, provided after
one year, and the terminal bonus but a staggering 7 per cent MVR had been
applied (is this to deter withdrawal to safeguard the reputation of the
fund manager who may not have delivered the performance required?)
When we asked for an explanation, we were informed that, although the bid
price had increased by 13.3 per cent over the 28-month period of
investment, the underlying assets had not achieved this level of return.
The policy condition that allowed this discretionary power was
unintelligible other than to an actuary.
When requested, they would not provide actual figures to support the 7 per
cent MVR as with-profits is a pooled investment and individual assets are
not attributed to each investor.
The FSA is to review with-profits business to consider discretion in fund
management, the quality of information given to policy-holders and the
transparency of published information about with-profits funds.
All IFAs whose clients have been similarly affected should present their
evidence. This may ensure that any insurance provider cannot abrogate
responsibility to the IFA for yet another “misselling scandal” as we
believe they were able to do for policies sold by IFAs during the period of
the pension review.
Until there is more clarity with the operation of with-profits policies, a
worthwhile product will be seen to be tarnished and lose public credibility
by the actions of a few, which would then be to the detriment of the many.