Standard Life to curb sales commissions
Monday 15 July 1996
The company said the upper ceiling on commissions was likely to be fixed at 40 per cent above a norm first set by Lautro, the former industry regulator.
The decision follows a number of reports showing that advisers' commission scales have been rising substantially in the past three years.
Lautro first decided to set a limit on salespeople's commissions in 1990. This became known as "100 per cent of Lautro" and was formally scrapped after being declared anti-competitive by the Office of Fair Trading. Even today, however, commissions are linked to the old Lautro scales.
Much of the recent increases have been driven by large national brokerages. They argue they should be paid more for the policies they sell because the volume of business they generate means economies of sale for individual insurers. In many cases, they have driven the rate up to 140 or even 150 per cent of Lautro.
Some advisers are believed to be earning even higher amounts, up to 25 per cent more than was commonly paid three years ago.
Although Standard Life declined to give exact figures, industry sources said that for a typical pounds 100 a month mortgage-linked endowment policy, the commission payment was roughly pounds 1,100. On the same scale, a personal pension scheme for the same monthly amount might involve a commission of just under pounds 900.
Standard Life's decision comes as the industry begins to recover from a three-year slump on sales, partly caused by the personal pension mis- selling scandal. Consumer groups have claimed poor advice is often driven by commission-hungry salesforces.
Benny Higgins, deputy general manager of sales at Standard Life, said: "Our view is that we should act in partnership with independent financial advisers, from whom we receive 86 per cent of our business, so that the market can thrive.
"We do not think it is in the interests of the market to be in a [situation] where providers outbid each other all the time.
"A number of providers have been bidding up commissions to win market share. There is anecdotal evidence that this is happening on an increasing scale."
Mr Higgins said the higher commissions being paid were partly caused by the inability of some companies to compete within the market on the more important areas of financial strength, performance and overall charges levied on their products. His discussions with IFAs indicated the vast majority supported Standard Life's decision.
Amanda Davidson, a partner at Holden Meehan, a leading firm of financial advisers in London, said: "Generally, I have little problem with what Standard Life is doing if the commissions saved are used to enhance the products on offer to policyholders.
"The danger is that it may not happen. The problem Standard Life may face is that if large brokerages see no substantial difference between one of its products and that of a rival paying more commission, they will go to the rival." She said her company is prepared to operate on a fee- paying basis and rebate commission back to customers.
- 1 The black and blue dress: Makers considering a white and gold version
- 2 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 3 What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 Madonna claims jokes about her age tantamount to racism: 'No one would dare to say a degrading remark about being black'
Husband and wife die holding hands within hours of each other after 67 years of marriage
Mohammed Emwazi: Nine things we know about Isis militant 'Jihadi John'
What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Madonna claims jokes about her age tantamount to racism: 'No one would dare to say a degrading remark about being black'
Oscars 2015: Birdman beats Boyhood as Eddie Redmayne and Patricia Arquette win big - as it happened
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
This is what it's like to be dead, according to a guy who died for a bit
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...