The financial services industry has long held the pretence of being a gentlemanly industry that rare...
The financial services industry has long held the pretence of being a gentlemanly industry that rarely turns on its own, even when wrongdoing is revealed. But the Equitable Life debacle has started to change this and, frankly, it is hard to feel sorry for Abbey Life over the recent fine for endowment mis-selling and compliance 'deficiencies'.
Is this being churlish you might ask, when surely a fine for a name such as Abbey Life is a fine for the whole industry? Simply put, no. The direct sales industry has spent years and not inconsiderable amounts of money telling consumers and the consumer press the vast majority of mis-selling has been carried out by intermediaries.
Of course, some IFA firms have mis-sold and have been fined, but the largest cases have been by direct sales forces ' the likes of Abbey Life and General Portfolio and other groups in the hard-sell camp.
It is difficult not to be left with the conclusion that some of these companies are just rotten to the core and it is quite clear the one significant route to closing the so-called savings gap in this country would be for the Government to tackle the distribution methods of the large insurance companies.
It is surely no surprise an office such as Standard Life can hold its head up in all these mis-selling debates because it has pursued a strategy of distribution based predominantly on IFAs. Insurance companies such as the Pru become great and trusted institutions on the back of the personal service and personal relationship the man from the Pru, and his counterparts at other large offices, built up through door-to-door collection. While Middle England may not want the man from the Pru calling at their houses, consumers on lower incomes for whom savings and insurance is not a major priority consistently demonstrate face-to-face service and relationships in their homes and neighbourhoods is what they want. You just have to look at the success of credit unions to see how this formula works.
Unfortunately, the current cost base of the life offices makes it uneconomical to do door-to-door collection, but this would do a significant amount to close the savings gap.
It might not feel like it but it is a great time to be an IFA. As an industry, you can, by and large, hold your heads up and feel proud for the quality of advice and value for money you provide to your clients. Ironically, this what the insurance companies used to do but don't consider profitable anymore. Don't by shy about it, say it loud and say it proud: you can trust independent advice.
'Right thing to do'
£69m spent on upgrades
European fintech market 'underserved'