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Active Member Discounts – The Myth of the Free Lunch

Over the last year, we’ve seen an increase in interest for Dual Annual Management Charges (or Active Member Discounts/AMDs for the euphemistically-inclined), where the charge is increased, even tripled, for those who stop paying premiums.

This charging shape may have been portrayed as an easy way of increasing commission and/or having a new selling point to employers – the “free lunch” that you’re so commonly told you can’t have.

AMD Myths - Busted?

Perhaps, you recognise some of these statements as reasons you were given for why AMDs are the future:

Myth? There’s no problem if you transfer out paid-up customers
Myth? This is the way forward for AMC-based commission
Myth? If the disclosure is inadequate, the provider bears the risk
Myth? The member is not your client, the employer is
Myth? The contract is cheaper
Myth? The charges are clearly disclosed
Myth? Long-term members benefit
Myth? Short-term members pay more

So what’s the problem?

As a provider, we’ve been looking at the AMD shape ourselves and have come to our own conclusions on those supposed advantages. Our conclusion is that this lunch is not going to be free at all. We thought that since you may have had the spin of AMDs, but probably not the potential pitfalls, we would share our thoughts on the above “benefits”. You can see why we’ve labelled these as myths by clicking on the statements on the right that interest you.

They don’t agree, why are you correct?

Correct, these are just our thoughts of course. That’s why we’ve added some questions you might like to ask AMD providers so that you can make your own mind up based on their answers.

So what’s your position?

We believe that AMC-based commission has a very limited shelf-life. We’ve been banging the “Factory Gate Pricing” drum for some time so we won’t go into that again now.

Customer Agreed Remuneration and Factory Gate Pricing are the future for the commission market. We are here for the long-term and that’s why we’re looking to set up schemes with you that can last the distance, not just until 2012. Just to make it clear...

We will not be offering AMC-based commission through AMDs.

Would you like to talk to us?

But we’re more than happy to talk further on our Financial Advisers Fee or our position on AMDs.

If you do want further information:

For professional advisers only