Hodson says advisers face a diminishing number of providers who will quote for smaller business and are almost being forced back down a commission type route in order to choose a provider.
Responding to a call for greater control on distribution by Nick Groom, sales director of Axa Corporate Benefits in an article in the April issue of Corporate Adviser, Hodson says providers who impose minimums for schemes and average contributions.
Standard Life has waded into the debate arguing that personal accounts and the retail distribution review mean pressure on charges will intensify rather than relax.
Groom said that to make corporate pensions work in an environment where margins are squeezed, distribution needs to be controlled, and underwriting carried out to the extent that the travelling expense of reaching a client’s offices should be loaded into annual management fees. He also called for the industry not to get too obsessed with low charges.
Hodson says: “Providers are so obsessed with internal rates of return that they are seeing only numbers and missing opportunities to work with IFAs – rather than at them – in a more partnership-based approach. Value rather than pure price should be the order of the day.”
Aston says: “We should be cutting the fat, not churning it. Higher margins from high charges are not going to be possible in the future. Those in the industry who hanker for the good old days are not likely to find their way by looking backwards.
“Mono charged products with up-front commission can take 15 years or more to become profitable. This can encourage advisers to restructure schemes, with few schemes currently continuing beyond their seventh year. With this in mind, we are working with advisers to reduce the dependency on up-front commission.”
Groom says: “Providers have to focus on people who are doing corporate pensions all the time, and we have to deal with a limited number of advisers. Small schemes don’t make a lot of sense in profitability terms unless you quote them at the right price and we will quote on small schemes provided the adviser is a distribution partner of ours.
“On charges, we should not look to erode them further than their current levels. We need to create an environment where reasonable charges are understood to be good for all of us.”
