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Chartered financial planner Shannon Currie is confused. Why do providers who successfully win business from her then do everything they can to lose it?
Let’s start with a basic fact of life: if you manufacture and distribute a product, there are three main competitive strategies open to you: price, features and service.
Looking at product providers in the UK post-RDR, the situation will be as follows: with no commission available on investment products, there can be no meaningful price competition without the manufacturers eating into their margins.
While great from a consumer viewpoint, this may spell trouble for some providers already struggling on the profitability front. Price competition is already an issue in the form of ETFs and cheaper funds anyway.
On many products, features are fairly vanilla and are often dictated by the tax wrapper used. Bells and whistles are simply not valued enough to warrant a premium price.
Which brings us to service (no, really, stop laughing). Let me repeat that. In a post-RDR world, providers will be largely dependent on competing on service to find and keep new business.
This brings me back to my point. Knowing you have to supply strong service is not rocket science. Articles and conferences are full of it. So why do providers behave as though it does not apply to them?
I can think of a reason, but first let us indulge in some real life examples of the lengths providers will go to destroy their prospects for new business.
1. Take a firm – let’s call it Grumpy Life. We asked Grumpy to change the agency in June last year. Unfortunately the client did not date the change of agency form, only the accompanying letter. So they rejected it. We sent a new one. They ‘lost’ it, so we sent a copy of the forms they had ‘lost’.
These were rejected because they were “more than three months old”. When we asked why they could not simply accept the date stamp as the date it arrived in their office, they told us this was in case the adviser ‘Tipp-exed’ the original date and inserted one to suit them. What a warped view of IFAs.
2. In another case, we submitted an annuity application for a client. The firm then requested a copy of the ‘reason-why letter’. When we pointed out that this was in fact a financial plan, that it was personal to the client and to distribute it would breach the Data Protection Act, they then asked for a dummy report. When we pointed out that this was nonsense, they agreed to proceed without it. But why ask for it in the first place?
3. When surrendering an investment bond contract, one provider wanted a full page completed, covering the reasons for surrender. I get one sentence, yet they want a full page.
4. One fund manager assured us it does not use email. They asked us to fax the information. This is 2011, right?
We see stupid things taking place, such as providers deciding that, as we have not placed new business with them for a while, our clients have mysteriously become their clients. Because we are not ‘servicing’ them.
But we are. We are advising them not to do any more business with Dinosaur Life, and we are moving their old expensive contract over to a proper, cheaper, better wrap account once any penalty period is over.
I’m sure every reader can top each of these stories. But my point is that, in each case, there is an army of bright young suits driving new BMWs to seminars where they persuade IFAs to place business with them. Meanwhile, some of the head office staff are doing their level best to punish anyone foolish enough to actually do so.
At times it feels like a clip from the classic training video: Who killed the sale? It is as though the administrative team are actively trying to destroy any possible goodwill or relationship between their client – the IFA – and themselves. Ah, did anyone spot that? I defined us – the IFA/planner – as the client.
This is problem number one. You see, these poor, misguided souls believe the real client – our client – is actually their client, and we are good little doggies who simply rounded them up for the provider.
When we contact the providers on behalf of our clients, they are astonished and ask for proof that we actually have permission to speak to them. In some ways, they have been right. Commission is classically paid to a middleman to obtain or ‘broker’ new deals and, once obtained, the client belongs to the manufacturer.
I feel as if I can hear you all shouting: “TCF, what about TCF?” And isn’t that a weird anomaly?
Providers have, in effect, chosen to interpret TCF as only applying to them when dealing with direct customers of theirs, and not when they are dealing with IFAs. Why hasn’t the FSA looked at this?
After RDR, providers should beware of continuing to behave as though we exist for their benefit, and theirs alone; that we get up each day, panting eagerly, fur groomed and noses wet, and go bounding out of the door to round up some sheep. And that we should be good little sheepdogs, and not worry our pretty little heads about what happens to those sheep once the farmer gets them.
Bad news: advisers do care and always have.
One last thought. A good litmus test for whose client it really is, is this: when we suggest to clients that Grumpy Life’s policy is not doing as it should, and that Service with a Smile Life’s offering is better suited, the client predominantly does so without blinking.
If a provider suggests to one of your clients they should change their IFA – the response should give you a pretty good indication of where the relationship lies...
Shannon Currie IMC DipPFS CFP is founder and director of Essex-based Perceptive Planning
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Totally agree
Have you had the insurance companies who state that our change of agency authorities are only valid for three months and we need to get a new one every time we want information before an annual review? This is despite our instruction specifically stating that it is effective until they are advised otherwise. Some insurance companies are now writing to us to inform us that our agency is no longer valid as we have not placed any business with them recently. I wonder why! DW
Posted by: Daniel Wackett
Agreed
Providers get simple things wrong, e.g. forcing us to use 0845 or 0870 numbers to phone them, which will earn them a few pence revenue per minute as we wait.
Posted by: JaywKay
Absolutely concur!
I just have to share it with you - the completely rediculous stance of some of the providers are absolutely hilarious. I can name and shame Phoenix Life as this is their COMPANY stance. When ringing for a valuation on a clients policy, which was clearly stated at the beginning of the conversation BEFORE going through all the data protection, I was told by the customer service rep that they had to order this to be printed and sent through the post and their current turnaround time was 10 working days. So I asked if it could be faxed and they said yes, it would take 10 working days to print and then fax.... so I asked for the valuation over the phone with the proof to follow, to which I was told it was the company's procedure NOT to give this information over the phone... so I asked her if she was looking at the valuation of the policy on the screen - to which she said yes but she could not help as it was the companies stance NOT....... blah blah blah... Its 2011... the age of technology... TCF (I presume I am the client at this point)and good customer service just dont seem to be a factor anymore...
Posted by: Lorna
Agreed!
Excellent article Shannon. Many years ago when regulation was first introduced the law of agency made clear that IFAs were agents of their clients and could not by definition be also agents of product providers. Many providers responded by simply changing the title of their Agency Agreement to 'Terms of Business', and continued dictating business practice as before. It was certainly not a negotiated agreement! Can you imagine Food manufacturers and suppliers telling Tesco how they will do business with them! Of course individually IFAS had no hope of redressing the balance of power. Thats a job for a trade body. Some day perhaps Garry Heath will Phoenix! As you suggest, many product providers - no lets be specfific - life offices are in for a shock post RDR.
Posted by: Green Eyed Monster
Excellent article
and rings bells for most of us I expect. I am neither anti nor pro RDR, but one of the good things about commission and "agencies going" is it will be clear again WHO we are the agent of and that is the client. I have a nasty surprise lined up for some of these insurers post 2013 and that is something I picked up when reading a lender's mortgage conditions (Abbey's) which include a general power of attorney in their favour, which the client does NOT even have to specifically sign in the small print. We, with our clients knowledge and on record as we record client meetings, don't get clients to sign an agency authority, we get them to sign a general power of attorney limited to information ONLY. So far, we have continued to play the silly game of issuing a fresh one when Dinosaur Life ask for a fresh copy annually, but as from RDR deadline, we may start to take legal action if they refuse to act on the signed powers of attorney which they have been issued. Personally I think the FSA have been turning a blind eye to this willful act as it all goes to helping their desired aim for a drop in IFA numbers, but post 2013, those IFAs who remain should not take this shi* anymore and need to stick to their guns, after all, extra difficulty in obtaining accurate info for a client either means higehr admin costs on our part (which we will have to pass on post RDR) OR we have to discuss transfer of a product with the client simply to administer their monies properly. As the article stated, Dinosaur Life are not TCF the consumer by their current actions.
Posted by: Phil Castle
Fees
In their rush to roll over on their backs and have their tummies tickled by the FSA, Dinosaur Life hasn't realised that in supporting the RDR they are also supporting a move to hourly fees. When I have to spend two or three hours of chargeable time sorting out some muppet administration problem I will be sending the client a bill for the time with a note explaining the problem and how they might like to complain to the provider to get their money back. On the other hand, some of the newer, 21st Century fund management groups treat us and our clients with respect and efficiency and are winning a greater proportion of our business as a result. Octopus Investments spring to mind as an example.
Posted by: Tom Scott
Good article
Excellent article which sums up our own experiences. There is nothing worse than starting work on a client's file, getting up to speed and then finding you cannot get the information you need having spent 15 minutes waiting to speak with the right department. So you pack up the file, diarise a follow up for 2 weeks, log 30 minutes against the client's bill,get another coffee and waste a few more minutes grumping to anyone who wants to listen in the office how useless providers are. which has cost one provider money in terms of compensation.
Posted by: Sam Caunt
Great article
which I certainly identify with, BUT The biggest message of all this is not just about poor service, but the fact that most(?) providers haven't yet got the message about the significant changes going on in the advice world, of which RDR is the catalyst. We are no longer going to be so provider-centric, as Shannon points out. Advisers are going to be sitting on the same side of the table as OUR clients, with providers on the other side. You still get the feeling that some providers think we are there to provide them with business. Instead, I am there to advise my clients, and four out of five times (for me) that means no provider is needed. Advice is king
Posted by: Peter Lawrence
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Too true too true
I could not agree more . However you have missed the latest business prevention toll- the secure E mail with the hidden password- and of course there is always the '' your change of agency form does not meet our requirement''. Sadly, if I want to give good service to a client I find that there are few companies I truat- the FSA wants us to look at charges but if a company '' let's call them B&L ( Bodgit and Legit) cannot communicate ebtween their own departments what chance has our client got?
Posted by: David Soulsby