Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a661171

AXA says FSA letter shows annuity charging method RDR-proof

by Jun Merrett on Feb 25, 2013 at 10:00

AXA says FSA letter shows annuity charging method RDR-proof

AXA has said a Financial Services Authority (FSA) letter it has received clarifying the regulator's stance on provider-facilitated adviser charging on variable annuity products shows its method to be retail distribution review (RDR)-compliant.

In a letter seen by New Model Adviser® the regulator states that providers advertising the overall figure of a guarantee under variable annuity products inclusive of an adviser charge before it is deducted could 'mislead' consumers.

The letter, which is dated 12 December 2012, said it would be more appropriate to base the guarantee on the amount invested after adviser charges have been facilitated.

AXA said its products were promoted in this way and the FSA letter was confirming that it was RDR-compliant.

'AXA Life Europe asked the FSA for clarity on how adviser charging should be treated in this post-RDR environment and in particular whether the guaranteed benefit levels could be calculated without having regard to the amount of adviser charges facilitated,' said a spokeswoman. 'On the basis of this guidance, AXA Life Europe launched a new version of Secure Advantage on 31 December 2012, which is compliant with both the spirit and the letter of the RDR framework and the guidance issued by the FSA.'

The FSA letter said: 'A situation where guarantees offered to consumers are not varied despite the level of adviser chargers facilitated through the product varying (because the guarantee is based on the total amount invested rather than the amount invested after adviser charges are facilitated), would mean that the guarantee would be worth more to the customers facilitating higher adviser charges (within the limits) than those facilitating lower adviser charges.'

The regulator also said it was concerned that by offering higher guaranteed benefits to those who chose to facilitate higher amounts through the product, an insurer would not be treating customers fairly, particularly for customers who choose to pay the adviser directly.

‘This raises concerns about the extent to which consumers would be able to understand the value of what they are being offered,’ it said.

32 comments so far. Why not have your say?

Sam Caunt

Feb 25, 2013 at 10:26

Please change the headline - FSA clarifies issue or something like that.

This is old news. My question is why would you take the adviser charge out of one of these products in the first place?

report this

David Hedge

Feb 25, 2013 at 10:30

Sam, the adviser charge is taken from the fund as it qualifies for tax relief.

If there is no detriment to the customer for not adjusting the guaranteed income on the product due to the adviser charge why do the cretins at the FSA insist on this change. The only loser is the customer.

MetLife appear to be able to continue with this practice. Further demonstration of the FSA's incompetence!

report this

Hannah Goldsmith

Feb 25, 2013 at 10:30

Wow...thats hot of the press news !!

Well done NMA you must have been the last in the industry to have read it.

report this

George Jeffrey

Feb 25, 2013 at 10:31

This needs clarifying, I use a competitor of the above whose products and expertise are far superior to those of the above and in my eyes market leaders by a long stretch, unfortunately this has resulted in AXA Global Distributors (Axa Wealth) undertaking a wholly unprofessional approach in attacking their competitors stance (which would be better for us ALL) instead of concentrating on their strengths, as a result our companies relationship with the AXA Group which has previously been excellent (Elevate is our preferred platform choice) is now very strained!

report this

Munir Mistry

Feb 25, 2013 at 11:03

Surely this is not the first time the FSA has seen this letter, ive seen it in numerous presentations, been sent it at least twice and have had a nice laminated copy in the post. Still have no idea of its use of relevance.

report this

Simon P via mobile

Feb 25, 2013 at 11:07

Not new news but the question has to be asked as to why the FSA are allowing MetLife to continue as they are if it doesn't meet the rules. As some people have commented, the MetLife approach appears to be better for clients - but if it doesn't meet the rules then you can understand why Axa aren't happy as complying with the rules puts them at a distinct disadvantage. FSA just need to clear this up for the good of clients and advisers - how are we supposed to give suitable advice when what seems to be the best product for the client might not actually be compliant. Nightmare.

report this

Mike Morley via mobile

Feb 25, 2013 at 11:19

Do the FSA give a fig about client detriment so long as all their boxes are neatly ticked?

Look at the number of increases in charges on "clean unbundled" fund charges - very consumer friendly!!

report this

Impartial Adviser

Feb 25, 2013 at 11:25

It appears the FSA have little idea which way to go, Metlife's offering is far superior and AXA's a veritable 'dogs breakfast' confusing for advisers and clients alike. I do hope they see sense and realise that Metlife's approach (they are without doubt the Goliath in this spat) is better full stop. And I mirror other comments above re AXA and they should refrain from their rubbishing tactics and try and concentrate on their own product strengths and not others so called weaknesses. In a straight choice I know which one we would prefer and it comes from over the ocean and not the channel.

report this

Knowledgable insider

Feb 25, 2013 at 11:44

The FSA, as is now clearly demonstrated, have yet again succeeded in their main aim!! This is to ensure that they are kept busy and are able to continue in their highly paid and irrelevent jobs and never mind about the poor clients at the other end that face higher charges as a result of this utter nonsense that is RDR.

report this

jennifer morrow

Feb 25, 2013 at 12:18

This issue has dragged on since December, my take on it is simple, AXA launch a product which is complicated for advisers and a pretty raw deal for our clients, another competitor sail along unheeded with a superior plan and AXA inform the regulator and in turn, turn to 1980's sales tactics to bring down competition!, as a whole its very unsavoury and an unwelcome distraction at a time when unity is needed in the industry. This letter has been hawked around by AXA consultants which has reduced somewhat my opinion of the company as a whole, we await the competitors response with interest.

report this

Paul Riddell

Feb 25, 2013 at 12:48

The article completely misrepresents the facts. The range is 100% RDR compliant. Can it please be corrected or taken down. If anyone has any concerns having read this article please call me on 01256 852023.

report this

Daniel Grote - Citywire

Feb 25, 2013 at 14:17

We included AXA's response as soon as we got it. The piece now goes in on this to make clear AXA's position.

report this

M.White - Boutique

Feb 25, 2013 at 14:30

It is a very big ask, but surely it is time for the Regulators to look at the bigger picture and put growth and commonsense before nick-picking red tape? The evidence is clear, the compliance pendulum has swung too far... so much so it now poses a real barrier to healthy competition.

More worrying is that a company with a clearly inferior investment product can use the regulator as a weapon which ultimately denies the consumer; as said above, this is very underhand and must make the regulator ask who it isactually mean't to be 'protecting'?

report this

An On y Mous

Feb 25, 2013 at 15:11

I think all this does is create confusion in the market.

IFAs need clear, solid information to give compliant advice - I thought the regulator was meant to help with that.

Ta

report this

Kevin Webster via mobile

Feb 25, 2013 at 15:25

So if MetLifes product is found to be non compliant where does this leave the client and the adviser? As always the adviser will probably have to carry the can. This is all fairly obvious anyway - if the guarantee doesn't vary with the amount of AC baring taken then the provider is effectively funding the AC - therefore it is commission. All the people on here saying that Axa should keep their mouths shut as the MetLife product is better for clients clearly don't understand RDR at all. Quite embarrassing really.

report this

SIck of underhanded tactics

Feb 25, 2013 at 15:41

Kevin, i think everyone on here is perfectly aware of the situation, the fact of the matter is the Met Life product is better for the client and was approved by the FSA last March.Teh comments haven't got anything to do with RDR and the only thing that is embarrassing is the 1980's sales tactics being employed.... what must be embarrassing for you is your total inability to read and comprehend the comments, lets hope you are more thorough in your dealings with your own clients (if indeed you have any)

report this

An On y Mous

Feb 25, 2013 at 15:47

Kevin: Agreed, we're also keen here at the office to understand which AC approach is compliant, which will in turn allow us to make a decision as to whether these solutions are fit for purpose in the new world.

report this

Kevin Webster via mobile

Feb 25, 2013 at 15:51

This has got everything to do with RDR. If you can't see that then heaven help us. Axa's tactics are a secondary issue - the main issue is around whether the metlife product meets the rules. The FSA letter suggests otherwise. I am quite thorough with my clients thank you - I don't have a slapdash attitude that you seem to have - you should do some due diligence. Or do you just work for MetLife?

report this

SIck of underhanded tactics

Feb 25, 2013 at 15:59

Why thank you Kevin, not quite sure where my slap dash attitude has arisen from. And no I don't work for Met Life, I have just accepted a job with the FCA conduct review team so I look forward to meeting you and your "thorough" team shortly.

report this

Kevin Webster via mobile

Feb 25, 2013 at 16:06

You are focussing on all the wrong issues with this so you will fit right in in your new role

report this

SIck of underhanded tactics

Feb 25, 2013 at 16:17

Oh dear Kevin.... you seem to have missed the point of my comment which was around the tactics being employed and the current understanding (FSA) of the suitability of the product in relation to RDR. If your due dilligence is based on speculation and a letter being touted by sales reps "heaven help" you. Now I have no more time to waste on your inane ramblings so I wish you all the best until we meet in the future

report this

M.White - Boutique

Feb 25, 2013 at 16:19

I agree this has everything to do with RDR, in that the whole implementation has been a sledge hammer to crack a very tiny nut…..So more a matter of the extent to which so called necessary compliance completely distorts the effectiveness and selection now available to the man in the street…..And if anyone suggests that the rain-forest of paper has any real practical interest to the end investor, then I truly despair.

Unlike many, who worry about criticising the actions of the regulator, I have on numerous occasions asked the question of how can it be justified for the FSA to adopt such a myopic approach when addressing the risks inherent in the financial services system?

The media have helped matters…..Clearly there were weaknesses, but was it really so smart to impose massive increases in compliance requirements without any thought for the wider consequences? Are we really in a better place to impose huge changes with associated costs and consequences on the majority in order to ‘protect’ a tiny minority of people who might have fallen foul on poor advice?

Well the answer, not surprisingly, is a resounding ‘No’ it was not. In short the approach was and remains a very blunt, ‘Amputation is better than a more structured Cure’....quite ridiculous.

report this

Kevin Webster via mobile

Feb 25, 2013 at 16:29

@ Sick of underhanded tactics - I've seen the letter (most people seem to have) so I am basing my comments on what I have read not what I have heard. You should read the letter yourself and then when you start your new job you can get someone who understands RDR to explain it to you.

report this

Munir Mistry

Feb 25, 2013 at 16:29

I must be one of the simpler IFA's operating in the industry today, I simply want the best deal for my clients and ones which fit their particular needs the best, the use of a product which either has a reducing guarantee to fund AC or monies 'hived' off to cover AC which are ultimately reducing the guarantee doesnt seem simple or attractive to my clients. I think we should all hope that the Metlife product is compliant as that is the one which fits my clients and not the AXA plan which I agree with an earlier commentator is a 'dogs breakfast', a guarantee without an actual guarantee and can reduce if I take my fees etc!!!!! Aaargggggh, so much for simple solutions!!!!. Good to see the AXA people adopting disguises to slant the debate back to them! Juvenile but enjoyable and this industry needs some fun!

report this

An On y Mous

Feb 25, 2013 at 16:34

Munir: You've hit the nail on the head. We simply want clarity on which AC position is acceptable from the FSA/FCA's perspective. I will continue to discuss these solutions with appropriate clients, but I'm affraid I will not be recommending these contracts until there is complete clarity.

Ta

report this

Impartial Adviser

Feb 25, 2013 at 17:25

To Kevin Webster

'Axa's tactics are a secondary issue - the main issue is around whether the metlife product meets the rules'

Wouldnt it have been better if AXA would not have hiked around the letter to all and sundry?. I feel we as IFA's and our clients would have been better having multiple choices of the Metlife version instead of total confusion. Surely, this muddying technique has added even more uncertainty to products which are there to provide just that - Certainty!!

report this

Kevin Webster via mobile

Feb 25, 2013 at 17:32

@ impartial adviser - I agree. The only reason I said this was a secondary issue is that I think clarity from the FSA is much more important as this is causing real confusion.

report this

V Simpson

Feb 25, 2013 at 18:11

I read these comments with amusement. This story is a classic. The American's come riding into town, shooting from the hip, the UK authorities do nothing in the face of such aggression and we all blame the French!

On a serious note, I'd be interested in know what the main players in the UK retirement income market make of all of this (your AVIVAs etc). I can't see them stomaching variable annuity products that allow adviser charges that look and feel like commission. Every IFA in the land will be selling them if they do.

report this

Simon p via mobile

Feb 25, 2013 at 20:28

@ SIck of underhanded tactics: pipe down will you? Everyone realises you work for MetLife and aren't just about to get a job at the FCA. I'm not going to defend or criticise AXAs actions but its clear you are on here with the sole purpose of bad mouthing them whilst highlighting that your product is better (don't let the matter of complying with rules get in the way). What us real advisers need is some clarity from the FSA so we can do our jobs properly. Not too much to ask surely.

report this

Munir Mistry

Feb 25, 2013 at 21:28

Confused here Simon, have Metlife confirmed that their product is non RDR compliant?

report this

Simon P via mobile

Feb 25, 2013 at 21:55

Munir - that is surely down to the FSA (should it be non complaint). The FSA letter seems fairly clear but it seems odd that they would issue the letter to Axa and do nothing further. I just think some further clarity would help - they are supposed to regulate after all.

report this

James T via mobile

Feb 26, 2013 at 15:38

SIck of underhand tactics, I hope you do not start work for the FCA as you strike me as a bit of a bully. I hope it is Met life you are employed by!

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Opportunities emerge as production moves back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

A spotlight on Alastair Mundy


Alastair Mundy met Citywire's Daniel Grote at the London Stock Exchange Studios for a detailed interview about the Investec Cautious Managed fund.

More about this article:

Archive


Read more...

Saturday Newspaper Summaries

by Himanshu Singh on Jul 26, 2014 at 00:01

Sorry, this link is not
quite ready yet