ulian Stevens Managing Partner, WDS IFAs Kingswood, Bristol Sir, I read with interest that ...
Managing Partner, WDS IFAs
I read with interest that Axa plans to stop paying initial commission on part of its personal pension platform in a bid to ensure new business is profitable (IW 26 May).
This must surely be a knee-jerk reaction to the fact it failed completely to realise that offering high commissions calculated as a percentage of contributions, irrespective of the client's age, would inevitably lead to selection against it.
Surely, this should have been obvious? As a result, Axa has lost money hand over fist, as there is nothing particularly special about their contract or funds or standards of service that would be likely to tempt IFAs to recommend them over competitors for any reason other than that they were paying more commission than any other office for short-term regular contribution pensions business.
What will happen if they now abandon initial commission altogether is that their personal pension business from the vast majority of IFAs will wither and die.
Not only that, but market share, once lost, is very difficult to regain, as Prudential will soon realise to its cost.
Instead of losing money by writing unprofitable business, this will be exchanged for losing money by writing no personal pension business at all. Brilliant! One has to wonder how the people who formulate such strategies ever got promoted to such positions of influence.
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