Prudential is changing its distribution model to favour intermediaries who want to move away from initial commissions to fees and 'factory gate' pricing.
The provider wants distributors to move from transactional-based advice, which it believes has an initial commission bias and encourages churning, to establishing long-term relationships with clients.
Prudential believes remuneration should reflect the level of advice given and it wants intermediaries to increasingly adopt 'factory gate' pricing, where the price of the product is set by the provider at the outset and the adviser and client then decide what remuneration should be given, and added on top.
As a result, it is changing its distribution model by splitting the country into four regions – the North, the Midlands, the South and London – and allocating a regional director to each.
The regional directors will have 16 sales units with a regional account manager, a telephone account manager and a sales support executive, and they will be responsible for identifying intermediaries who have the propensity and desire to move to a new remuneration model for advice.
Those intermediaries will be given support to find and look after clients, run their businesses more efficiently, and introduce fees and trail commission as part of their remuneration.
Dave Harris, distribution director at Prudential, believes intermediaries who develop long-term relationships with clients will be more likely to comply with treating customers fairly (TCF) principles and, in addition, he says Prudential’s profits will rise because of higher persistency rates.
He states: “We have had responses from intermediaries who say, ‘At last there is a product provider who is not just trying to push products’. The model might not be for every adviser, but the ones who adopt it will be over-served by Prudential.
“We will continue to support commission options in bundled products because there is excellent advice given on a commission basis. But what we don’t like is commission being taken and advisers habitually doing a five-year review, stopping the policy and replacing it with another one.”
The new structure will in place at the start of next year and it is expected to take 12-24 months to fully evolve it.
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 Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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