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Widows&#39 renewal clause angers IFAs

Balloon barrage: Consumers&#39 Association director general Sheila McKechnie has written an open letter to the FSA demanding that it identify where consumers are most vulnerable to poor products and financial information in its first 100 days after getting its full authority last week. It wants an FSA action plan on how it will root out rogue providers and advisers. The CA went to Canary Wharf last week to urge the FSA to get tough.

IFAs are outraged that Scottish Widows will not review a term of business which requires them to continue placing business with the life office or risk losing renewal commission.

The terms of business contain a clause reserving the right to stop paying renewal if IFAs fail to introduce business for three years.

The clause, which has taken IFAs by surprise, was first introduced over five years ago but has come to IFAs&#39 attention in new terms sent out for N2. It means that IFAs could lose trail commission when they pass on the maintenance of a contract through an agency agreement on retirement.

Advisers say the clause undermines the concept of renewal commission and its encouragement of long-term service to the client. They are concerned that Widows is telling them who they have to do business with and hindering efforts to grow the value of their businesses through trail.

But Widows claims it has never invoked the clause although it is refusing to review it.

Head of IFA development Robert Wyllie says: “Where we have a relationship that is completely dormant we will review it and if we thought that we could not reactivate it, the IFA may not get renewal.”

IFA Ruth Whitehead says: “It seems excessively punitive and sets up a conflict of interest for the IFA. The best thing to do to get extra business in this competitive world is to provide excellent products.”

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