Those who shout loudest….

I am fairly new to this blogging malarky. I created a blog when I left my life insurance company bubble in April and joined the “real world”. The first thing I noticed was the immediate pressure I felt to say something interesting, a bit like when you meet someone new who feels the same way and you end up talking about the weather.

If you happen to look at my other blog (please do as the visitor stats are depressing) then you will see that I don’t give a technical view, nor do I profess to know a great deal about anything. I like to give the occasional view on subjects that get my attention and pass an opinion.

Personally I’m a bit worried that my favourite Google search term is “annuities” and how much some of the stuff I find winds me up.  Annuities seem to be such an emotive subject, and the current phrase which is really stoking the fire in annuity world is “non-advice”

So far I have seen “non-advice” referred to as unregulated (wrong), limited advice (wrong, no advice is given) and execution only (wrong).  These terms are being thrown about by those who have the ear of the press, and in my view, are being used to create unnecessary hysteria, which is something our industry loves to do. If they asked me  I would say –  a non-advisory service should give a client all the information they need in order to make an informed choice. I believe this is also referred to as a “guided sale”. I prefer that term as it explains pretty much what it is….a sale which is guided.

Another alleged fear is that unqualified IFA’s (the great unwashed) will now start to offer a non-advised service just so they can earn a commission. Perhaps someone could clarify this for me. Could an IFA/Adviser have woken up on the 1st January 2013 and decide to start offering “non-advice” services just because they weren’t qualified? I don’t believe you can just start offering a non-advised process at the drop of a hat. It can be badged up as execution only, but that is not a non-advised sale, something which many in the industry would do well to remember.

I suppose the question to be asked is why do these non-advice services exist? Is it because some clever people have spotted an opportunity to make a load of money? Well yes. Is it because the annuity providers love a shed load of volume? Yes again. However do they also exist because, quite frankly, if your pension fund is looking to buy an annuity, then an adviser probably doesn’t want to deal with you. So why all the hot air about clients self serving when the adviser doesn’t want to serve them anyway.

What cannot be ignored is the issue of customer protection , if you take advice and it goes wrong then the IFA gets it in the neck. If you do it yourself, then you have made your own recommendation and its tough luck if it wasn’t right. What a good non-advised business will do is ensure that the customer understands what they are doing, and test this understanding through the process. If they don’t understand, take them out of the process and put them to someone who can advise them.

I’ll be interested to see what the FSA/FCA will do. They are under pressure from certain quarters to ban commission on non-advised sales. Would that kill the non-advised market? I don’t think so, despite it perhaps being the hope of many. If that happens these companies will just find a way to serve the “mass market” more efficiently and profitably. Would that be acceptable to the advice market if no commission is paid? Answers on a postcard!

Share:

4 thoughts on “Those who shout loudest….

  • Hi Adam,

    If you look at the first few pages of google for annuities a high proportion of the companies featured offer guided sale only. I personally have no issue with guided sale as it certainly offers the mass market an option if they cannot find a firm to offer full advice (small pension fund)

    The issue as I see it is in the disclosure and also cost. The guided sale process should always be lower cost than advised sale for the reasons stated in your blog, no liability, no R4R document etc… From what I have seen this is not always the case as I have seen commission of 2.5-3.5% taken which is top heavy when you are not actually advising the client what to do.

    Again the disclosure is important as the guided sale firm can differentiate between themselves and advised sales companies by saying “they are paid by the provider” rather than a clean fee, there certainly is a blurring of the lines here.

    I am about to launch a new advised only annuity proposition with capped fees that will be cheaper than the majority of guided sales firms, so will perhaps be in a better position to comment once this is launched to see the value that is placed on advice.

    Gareth

    Reply
  • Hi Gareth,

    Thanks for your comment and for taking the time to read my post.

    You raise some really valid points, none of which can be argued with. The subject of commission and how much a non-advice service takes will continue to be “debated” until the regulator makes a call on it.

    There is such a fine line between advice and non-advice, even saying the wrong word, or words, could lead a firm falling in to advice territory. This is why it is vitally important that a non-advice business has a robust process in place. This process plus the cost of acquiring customers (Google search etc) probably means that whilst the commission is on offer from the providers, then it will continue to be taken.

    The number of guided sale firms now appearing is pretty frightening, and whoever has bought the page http://www.missoldannuity..com could be in line for a windfall, particularly if the robust process I mentioned above is not in place.

    I would be interested to see how your new proposition fares, and I hope that it is successful. I would love to see an advised proposition that can cater for the mass market, where a guided sale process isn’t appropriate. After all the mass market accounts for the majority of the market, and if together we can help people better understand their options in retirement, guided or not, then that has to be a good thing!

    Adam

    Reply
  • Hi Gareth,

    Thanks for your comment and for taking the time to read my post.

    You raise some really valid points, none of which can be argued with. The subject of commission and how much a non-advice service takes will continue to be “debated” until the regulator makes a call on it.

    There is such a fine line between advice and non-advice, even saying the wrong word, or words, could lead a firm falling in to advice territory. This is why it is vitally important that a non-advice business has a robust process in place. This process plus the cost of acquiring customers (Google search etc) probably means that whilst the commission is on offer from the providers, then it will continue to be taken.

    The number of guided sale firms now appearing is pretty frightening, and whoever has bought the page http://www.missoldannuity..com could be in line for a windfall, particularly if the robust process I mentioned above is not in place.

    I would be interested to see how your new proposition fares, and I hope that it is successful. I would love to see an advised proposition that can cater for the mass market, where a guided sale process isn’t appropriate. After all the mass market accounts for the majority of the market, and if together we can help people better understand their options in retirement, guided or not, then that has to be a good thing!

    Adam

    Reply
  • Hi Adam,

    If you look at the first few pages of google for annuities a high proportion of the companies featured offer guided sale only. I personally have no issue with guided sale as it certainly offers the mass market an option if they cannot find a firm to offer full advice (small pension fund)

    The issue as I see it is in the disclosure and also cost. The guided sale process should always be lower cost than advised sale for the reasons stated in your blog, no liability, no R4R document etc… From what I have seen this is not always the case as I have seen commission of 2.5-3.5% taken which is top heavy when you are not actually advising the client what to do.

    Again the disclosure is important as the guided sale firm can differentiate between themselves and advised sales companies by saying “they are paid by the provider” rather than a clean fee, there certainly is a blurring of the lines here.

    I am about to launch a new advised only annuity proposition with capped fees that will be cheaper than the majority of guided sales firms, so will perhaps be in a better position to comment once this is launched to see the value that is placed on advice.

    Gareth

    Reply

Leave a Reply