RDR brings a requirement for transparency into the nature of relationships between customers, their advisers and product providers. This transparency is especially relevant around issues affecting:
- The charges that customers pay and what they are for (cost)
- The responsibilities that each party has (responsibility)
- The control and influence that might exist in conflicted situations (independence)
Most of the participants in financial services are quick to defend their attitude toward customers, but if my experience is anything to go by, there is a problem.
In March 2014 I set up a medical aid policy with a well-known large provider. The policy was recommended through my Independent Financial Adviser. As far as I’m concerned, my relationship is with my adviser, and the product provider is simply the supplier of a product.
3 months after inception, I received a call from the product provider to directly sell me a supplemental policy. When I asked if my adviser knew we were having this conversation, the telesales agent said yes.
When I contacted my adviser, he said he wasn’t aware that the conversation had, or was going to, take place, but he wasn’t surprised since product providers frequently do this. Apparently it’s a common practice among certain (most?) multi-channel life assurance companies.
The product provider has no knowledge of me or my circumstances, and the only question asked was whether or not I had smoked tobacco in the last 12 months. They were clearly happy to sell me a policy on the strength of that information.
Who is responsible for the sale and any advice?
It turns out the product provider would have paid 80% of the commission to the adviser and retained 20% for themselves. Where are the lines for responsibility?
I wrote to the CEO and received a reply from the head of marketing, essentially defending the action as being intended not to maximise sales, but rather to ‘support advisers’ on what is an uneconomical activity for them. An offer was made to engage further on the discussion, and when I chose to do so, there were no further replies.
The exercise featured in my book Keep-Calm &-Survive-RDR as a study in what is wrong with the relationships underlying the financial services industry.
18 months later, in October 2015 I received a cold call from the same telesales department of the product provider, this time trying to sell me an additional benefit to my existing medical aid policy. Again, I asked the salesperson whether my adviser knew we were having this conversation and this time, I was told that it was in my interest to deal directly with the product provider since going through my adviser would involve the addition of commission to the premiums, which could be saved if I by-passed the adviser.
That’s an interesting way to ‘support’ advisers.
I e-mailed my adviser to explain what had happened, and copied the head of marketing into the e mail. The same one that had failed to engage with me 18 months earlier.
He confirmed that he had in fact listened to the call recording, and was horrified. The call centre operation was blamed as having not followed procedure and evidently the actual salesperson was in her first month. Did she decide to make this sales script up on the spot? I doubt it. And if she didn’t, at what point does the training team realise that what the call centre staff are trained to say will come out on a recorded call. Either way, the company has trained this script.
There were, again, profuse apologies from the product provider. I doubt they are genuine. I don’t trust them, and unfortunately, that lack of trust impacts on my adviser.
Less than a week later, I had yet another call from the same department on exactly the same matter. I terminated the call as quickly as possible and sent another e mail to both my adviser and the head of marketing. Apparently, I have now been removed from the marketing database. It remains to be seen whether I will get further calls.
As a customer, I am left wondering what is going on. As a former financial planner of 25 years, I know exactly what is going on. The industry is controlled by big insurance companies who largely treat customers and financial advisers with complete contempt.
I don’t really care who my insurance is with, as long as the policy delivers the benefits it promises to. I’d even pay a bit more not to be treated with contempt. These companies are ruthless in their quest for distribution and unless the culture changes (it won’t), or the regulator hits these firms hard (hint!) things will not change.
There is significant value in the client/adviser relationship, and the quality and independence of advice from control and influence from a third party product supplier. If financial advisers are to be seen as professionals, product providers must stop, or be prevented from, engaging in the many behaviours that control, influence and damage independence.
What do you think?