Scottish Life finds strong IFA support for transparent remuneration structures
Thursday, 27 September 2007
Scottish Life, the pensions specialist arm of the Royal London Group, has highlighted a growing demand from Independent Financial Advisers (IFAs) and their clients, for transparent and flexible commission structures.
87%* of Scottish Life's regular premium new business is currently being written using a fee-based structure, primarily the Financial Adviser's Fee (FAF) commission option, which is a form of Customer Agreed Remuneration.The remaining 13%* of cases use the traditional initial commission basis.
Jim Smith, Sales Director at Scottish Life, said:
"Some research carried out by other providers has suggested a possible degree of resistance from advisers and clients to the use of Customer Agreed Remuneration (CAR).Our practical experience, over a period of more than four years, demonstrates a much more positive view in reality.
"It indicates that the use of CAR, as proposed in the Retail Distribution Review Discussion Paper, is very likely to be successful in establishing a sustainable model in the marketplace."
Jim Smith, added:
"The rate at which advisers have switched on to our FAF option, and worked out the best ways to explain it to their clients, has varied from individual to individual.There was a clear group of 'early adopters', so that within a few months of launch, around 30% of our new business was being written on the FAF basis.In the subsequent couple of years we saw a steady rise to about 70%, since when the proportion has increased to just under 90%.This level of take up demonstrates a clear acceptance by advisers and their clients of the benefits of having a more transparent and flexible approach to commission structures."
* Source:Scottish Life figures for 1st half 2007.The figures relate to our Individual pension business.
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For further information please contact:
Scottish Life
Alasdair Buchanan
Head of Communications
Tel: 0131 456 7133
Mob: 07919 170 413
Polhill Communications
Jenette Perry
Tel: 020 7655 0530
Editor's Notes:
Financial Advisers Fee was launched in May 2003, initially for individual pension business, and later to the Retirement Solutions range of group pensions.FAF allows IFAs to agree with their clients a fixed amount as the initial charge for advice, giving maximum remuneration flexibility and providing a bridge between fees and initial commission.The key benefits of FAF are transparency and the opportunity to discuss the true value of the services provided by advisers to their clients.
Scottish Life was founded in 1881 in Edinburgh as a proprietary company, becoming a mutual company in 1968.
On 1 July 2001, Scottish Life demutualised and transferred its business to The Royal London Mutual Insurance Society Limited.Scottish Life is a division of Royal London and is the specialist pensions business within the Group, providing individual and group pensions to the market via intermediaries.
Scottish Life and Royal London's other intermediary businesses are based in Edinburgh where 1,200 staff are employed, with 190 working in other parts of the UK and overseas.
Royal London Group is a specialist financial service provider. Its businesses focus on those sectors of the market which value premium propositions, operating through a number of brands:
- Scottish Life – UK pensions market
- Bright Grey – UK protection market
- Scottish Life International – offshore investment markets
- RLAM – fund management
- RLAS – life and pensions administration
Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £32.7 billion.Group businesses serve around three million customers and employ 2,570 people.(Figures quoted are as at 30 June 2007).