Emma Ann HughesJul 28 2017

What providers should tell your clients

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Forget about the credit crunch, bankers’ bonuses, headlines screaming about payment protection insurance mis-selling scandals, etc.

I’ll tell you why people don't trust this industry: there is no reward for loyalty.

Two stories illustrated this fact this week.

What never ceases to amaze me is how providers are swift to contact clients when it could result in them making them more money. 

Aegon came under fire for allegedly poaching clients from advisers via an automatic upgrade process.

The firm has been accused of writing to clients to inform them their account is going to be "upgraded" if their adviser has not contacted them within a 12-month period – without notifying the intermediary of its plans.

If the customer fails to reply stating they do not wish to be upgraded, their policies are automatically moved onto Aegon’s direct to consumer Retiready platform.

There is nothing wrong with upgrading clients – who wouldn’t take a first class seat on a plane if offered to them free of charge when all they purchased was standard class.

What EVERY client wanted when they first engaged with this industry was the best deal available to them. That deal is available through a financial adviser.Emma Ann Hughes

But what the problem is here is the fact the provider went straight to the client rather than spoke to the adviser who introduced them.

These clients chose a financial adviser. They chose a financial adviser rather than going direct to a provider because they wanted the best solution for their needs from the whole of the market.

If they are no longer getting that, then that could be because the client has decided they are happy with what they have and don’t want to make regular changes to where their cash is held.

Providers should not offer “upgrades” – if they are generally concerned a policyholder is orphaned then they should contact the adviser who introduced the client in the first place to see if there is still a relationship.

If the adviser says they do still have a relationship with the client then that is the end of the matter.

If the provider doesn’t hear from the adviser, only then could a letter be sent to the client stating: “We are pleased you continue to have a policy with us. If you seek further assistance or to check if this is still the right solution for you contact a financial adviser.”

The provider should then list other active financial advisers in the client’s area.

Because ultimately – hate to break it to you providers – anything else will be seen as poaching.

On the flipside of Aegon, the Citizens Advice Bureau proved how providers don’t utter a word if it means they can pocket extra cash.

An analysis of the mortgage market by the Citizens Advice Bureau (CAB) revealed one in 10 borrowers face a penalty of more than £1,000 a year if they remain on an SVR at the end of their term.

A failure to switch to a better rate at the end of an initial term can be due to stricter affordability criteria introduced by the Bank of England in 2014 preventing borrowers from remortgaging – the so-called ‘mortgage prisoners’.

But Citizens Advice found it can also be due to a lack of consumer knowledge regarding the ability to switch to a better product – and clearly the failure of lenders to flag to borrowers the fact they are no longer on the best deal available to them.

According to CAB’s analysis of the 4,147 clients with mortgages it spoke to last year, older consumers, people on low incomes and those with lower education levels are more likely to face the extra payment, with many deterred by the complexity of the market.

The CAB has called on the Financial Conduct Authority (FCA) to tackle the problem, saying it should require lenders to improve the content, timing and format of existing prompts to switch mortgage deals. 

To me both of these stories aren’t about who owns the client – it is about the fact borrowers, savers and advisers aren’t being rewarded for their loyalty.

Nobody owns the client but what everyone in financial services should respect is the fact what EVERY client wanted when they first engaged with this industry was the best deal available to them.

That deal is available through a financial adviser.

This is what providers should flag – anything else just isn’t treating those clients fairly.

emma.hughes@ft.com