A row is threatening to break out between Standard Life and financial advisers as the life office is introducing a client communications process to bypass advisers and obtain direct client signatures when requests are made for transfer values or transfer of pension and life contracts.
Introduced tomorrow (20th December), the process is said to be the result of Standard Life’s research into its own customers who have cancelled their with-profits policies, with the company claiming most of them – including those using financial advisers – “did not know that their plans included a growth guarantee”.
It is this lack of awareness Standard Life cites when says it wants to issue new “explanatory guides” directly to all customers whenever it receives “a request from the customer or their adviser for a transfer or transfer value.”
In a letter being sent to intermediaries, the provider explains: “The first guide highlights some of the benefits that a with-profits customer might lose and the second guide outlines some of the other options generally available to all customers.
“We are also introducing a new declaration form for the customer to sign to confirm that they are aware of the benefits they might lose as well as the other options available.
“This new process will apply to pensions initially and a similar process will be introduced for life contracts after the New Year.”
Standard Life does not identify, however, what the “other options” are.
The company says it has to take this action to ensure it treats all its customers – advised and non-advised – in a “fair” way.
Perhaps in a reference to FOS cases involving clients who have claimed ignorance of discussions and still won cases against intermediaries, Standard Life furthermore argues its approach “should in fact help to protect advisers against future complaints from forgetful customers as our guides will back up many of the key issues covered during their advice process”.
Nowhere in the letter does Standard Life suggest it will share knowledge of receipt of a direct client signature with the client’s chosen intermediary.
In order to create added protection from future legal or other issues arising from decisions on transfers or transfer values, the letter does state the signatures reduce “the chances of Standard Life being held liable through failing to provide adequate information”.
But Michael Inkley, director at Sanderson Law Financial Management, says the letter, its contents, and its timing coupled with recent comments from people linked to the firm suggest there is a major storm brewing between advisers and Standard Life.
He says he has already heard concerns expressed about the net flow of money out of policies affected by this latest proposed change, indicating the letter could be part of a strategy to turn the flow around, or at least reduce the amount being lost.
Inkley believes there are several points of the letter which need counter-arguing.
The reference to growth guarantees, for example, is only valid for pre-2000 policies in any case, as that is the year the company stopped offering them, he says.
Moreover, if Standard Life is arguing its aim is also to protect the adviser from potential future complaints then there is no need to go behind their back to communicate directly with the client, says Inkley.
“If client ‘A’ takes specific advice from adviser ‘B’ and then some two weeks later gets a letter from Standard Life making suggestions about what the client may lose out on by transferring out, which suggests “options” for that clients, and then asks them to sign a document suggesting they understand what those options are, how does that not undermine the adviser?" he says.
"If the danger is lack of responsibility on the part of the adviser, then how on earth could Standard Life have a responsibility? Clearly it’s all about money going out,” suggests Inkley.
Inkley also does not see how the argument referring to 'Treating Customers Fairly' holds water as he believes the new strategy may also be challenged on practical points too: if advisers regularly send in requests for transfer values as part of annual reviews, he questions how clients are going to react to repeated receipts of the guides and documents asking for their signatures.
He has also questioned whether, if every adviser sent in a request at the same time, it would be enough to overwhelm the system?
“The bottom line is whose clients are they?” Inkley asks.
Fay Goddard, director of policy at the Aifa, echoes Inkley when she says there is a general question facing providers over the issue of with-profits customer churn.
The key question which requires an answer is whether a document – from Standard Life or any other provider – becomes “intrusive” in the client-adviser relationship.
If a transfer value request has been executed on behalf of a client following considered financial advice and discussion between the client and the adviser Goddard says she would not then expect providers to come with counter-advice.
It is assumed the adviser has covered all the angles and options, she adds. At the end of the day, each piece of advice will be unique to a particular client.
Goddard also points out the association supported Pru over its previous decision to refuse transferred-in business if it were seen to be detrimental to the consumer interest.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected].IFAonline
Warns on profits
Hargreave Hale seeking legal advice
Latest news and analysis
First mentioned in Cridland Report