This is interesting. I have just come
back from the USA where I was attending a Committee meeting of MDRT which, as
most folk know, is an international organisation of financial services
professionals from 72 countries, committed to professional excellence and
ethical business methods. Of all those countries
represented, the UK has the highest number of IFAs, and co-incidentally the
highest "persistency ratio", that is, business staying on the
books. Of course, we also have the lowest charged products
anywhere on the planet, bar Australia which is similar to us.
It seems the insurance companies, left to their
own devices, enjoy the fact that, unfettered by the demand for lower-charged
products which the IFAs require, they can rely on the policy-holder lapsing
the average policy every 7 years enabling the company to re-sell another with
a further set of high initial charges just as they used to in this country
before the rise of the IFA and the demand for fairer product terms.
The UK regulator is as we all know heavily
dominated by banks and life companies who have many things on their agenda,
however one of them is NOT the survival of the IFA sector which is probably
the lone way by which the public stands a chance of obtaining impartial advice
with, if appropriate, the sale of an appropriate product with competitive
charges. Indeed, it is not in the interests of banks and insurance
companies for us to survive, so a regulator mainly dominated by such folk is
to say the least, a serious worry.
Passing on the distribution costs to IFAs with, if
appropriate, a larger commission does at least enable the insurance company to
predict it's distribution costs. Usually a larger commission is simply a
reflection of a volume discount, something which applies in every other area
of commerce. It rarely (if ever) is taken from the product but rather is
taken from the insurance company's own retained costs.
Secretary, Toptrak IFA Study Group
02920 650 662
----- Original Message -----
Sent: Friday, January 28, 2005 10:22 AM
Subject: FSA warns of high cost of small IFAs - Please tell me how
paying more commission reduces provider costs..
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