Life companies' plans to penalise IFAs whose client persistency is low have been slammed by an adviser.
Anna Sofat, director of AJS Wealth Management, says such action would be like “taking a sledgehammer to crack a nut” and warns firms to remember an IFA’s loyalty lies with the client.
Several life companies are introducing measures in a bid to stem business lapses, including a hit-list of churning advisers and loyalty discounts for pensions customers.
But Sofat says it is far too easy for life companies to look elsewhere for the roots of their own problems.
“Insurance companies are losing money because they are not very good at managing money,” she says.
“They are looking to penalise IFAs whose persistency is high. But they don’t know why IFAs are persistent.
“It looks to me like they are going out with a sledge hammer to crack a nut. What they are not doing is looking at themselves and asking: ‘Why are we losing money?’
“When I first heard [that life companies were doing] this I was quite annoyed, but now I just have to chuckle.”
Sofat says life companies would do well to remember an IFA’s loyalty lies with their client.
“I’m not in favour of churning, but I am in favour of IFAs doing what’s right by their client,” she says.
“If that means moving them, then that means moving them. My loyalty isn’t to companies, it’s to the client.”
Clerical Medical is said to have taken the innovative steps of cutting its consultants’ salaries if any business they are credited with is switched to another company inside two years.
In addition, Norwich Union Life has also reported to have identified 200 IFAs it considers the ‘worst offenders’ for poor client persistency and said its employees have been incentivised to work on persistency.
That said, other life offices claim there is no official 'blacklist' of adviser firms which companies are unwillling to do business at the same time as there is no official group among providers to discuss which advisers they will not do business with.
A spokesman for Scottish Life has confirmed, however, firms do occasionally share non-commercial best practice ideas and information.
Have your say: Dennis Hall, chartered financial planner, Yellowtail Financial Planning, says:
"If only the life offices were really serious about hunting out churners the industry would be better for it. However, my own experience at trying to take de facto cases of churning to one of the companies named in your report has achieved a big fat zero. Clients pension was inside a pension contract for less than 6 weeks, and then churned. Big fat £8K plus commission received by IFA and no loss to the client, life office picks up the tab, as do shareholders and existing policyholders. How can I place business with this firm again…difficult to impossible. The adviser who has hit out needn’t worry, it’s all hot air in my opinion."
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 Scott Sinclair on 020 7034 2636 or email [email protected].IFAonline
Joined as head of strategy, multi asset, in June
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