Outlook: Pension off commission man

PETER DAVIS, the man from the Pru, does not have quite as far to come back from holiday to clean up the latest mess at Britain's biggest pension provider. A quick hop up the M4 from Wales should do it.

If there is any consolation for the Pru it is that almost any day of the week dozens, possibly hundreds, of people will be mis-sold a personal pension by one company's sales force or another.

Thankfully, the scale of the problem is nothing like that of the early 1990s, when the figures ran into thousands each day over a period of several years. But the fact remains that no matter what the UK's insurers say, or their loudly-proclaimed regret at past excesses, their salesforces will continue to give the lie to claims that the industry has sorted out the mis-selling scandal once and for all.

Part of the industry's answer to mis-selling has been to beef up back- office compliance teams so that poor advice can be weeding out and money returned to customers before an inappropriate pension plan can turn into a millstone around the neck.

But this sort of back-stop arrangement is not calculated to reassure customers. Nor can it be 100 per cent effective, as the Pru attempted to suggest yesterday.

In the first instance, the real problem concerns how insurance salespeople are recruited, trained and paid.

It is now beyond any doubt that if you take a group of people relatively unversed in financial matters, give them one or two weeks' training and then let them loose on customers, you risk the possibility of mis-selling. All the more so if the way that salesforce is paid is by commission.

The only way to significantly reduce future financial scandals is alter the nature of recruitment, insisting on higher pre-entry qualifications for all new staff. Their training - and the exams they are required to pass, should be far longer and tougher.

Finally, sales commissions must be scrapped and replaced with a proper remuneration system that does away with the compulsive need to sell yet another policy, no matter how inappropriate, in order to round up that salesperson's monthly income.

Nor is it enough for the Pru to substitute commission with rewards for the "long-term relationship" a salesman has with his customers. As past experience shows, you can mis-sell for years and still be thought of highly by clients who are marginally more ignorant than you.

Today it was hapless Prudential's turn. Unless changes to the way the entire industry works, tomorrow it could be almost any other insurer coming under the spotlight. Their customers, all of us in fact, deserve better than this.