The suspension is further evidence of the deepening concern among industry regulators over the quality of advice given to the public on life assurance and pensions.
Nationwide is planning a retraining programme for the 650 staff dedicated to selling financial products of Guardian, the insurance group for which Nationwide acts as a tied agent, after Lautro uncovered shortcomings in their supervision. The retraining program is expected to take eight to nine weeks.
The society is also considering a training programme for the remaining 650 non-dedicated sales staff. Brian Davies, Nationwide's operations director, said: 'Questions were raised about the number of senior supervisers we had overseeing the sales staff. We saw it as an opportunity to bring ourselves to the forefront of training standards.'
Nationwide and Guardian said that the ban did not mean Nationwide's clients had been mis-sold life insurance. Nationwide said that if any of its clients were concerned about the standard of advice they had been given they should contact the society. Customers wanting financial advice will be put in contact with a member of Guardian's own sales staff until the retraining is completed.
Nationwide is the latest company to feel the effects of the crackdown by Lautro on the quality of insurance advice, following evidence that the public have been mis-sold pension policies.
Earlier this year, following intervention by Lautro, Norwich Union's sales force was stopped from selling financial products while it was retrained. It was later reprimanded and fined pounds 300,000.
The regulator is currently in dispute with Prudential, the industry leader, over an investigation into the way the Pru has been selling transfers into personal pensions. In a statement yesterday, the Pru claimed it was approached by Lautro in April to co-operate in an informal review to 'validate Lautro's pension transfer rules for the future'.
The insurer added: 'Prudential challenges any contention that it has acted improperly with regard to pension transfers.' It insisted it had no reason to make provisions against the mis-selling of pension transfer products.
In a memo leaked over the weekend, however, Lautro said that as a result of the investigation 'there was evidence of significant cause for concern that . . . the practices in use did pose a risk and had, in a significant number of cases, caused actual harm to investors'.
The memo complains about the Pru's behaviour over the investigation. It says Mick Newmarch, chief executive of the Pru, insisted in a telephone call to Kit Jebens, Lautro's chief executive, that the formal investigation proposed by Lautro should be changed to an informal one. Mr Newmarch argued that a formal investigation would be price-sensitive and would therefore have to be reported to the Stock Exchange.
A report from the Savings and Investments Board, the ultimate financial services regulator, on how companies can identify customers who have suffered through mis- selling and make financial reparation, may be delayed for several weeks after its intended publication date at the end of this month.
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