Media > Press Releases > Archive > Scottish Life's FAF increasingly popular with IFAs
Scottish Life's FAF increasingly popular with IFAs
14 July 2006
Scottish Life's groundbreaking commission alternative, Financial Adviser's Fee (FAF), is now three years old and has been going from strength to strength. Recent figures show that there has been a significant increase in uptake from around 50% in May 2004 to more than 80% of new 'Individual' business as at May 2006 are being written using the FAF remuneration option. And over 50% of Retirement Solutions - Scottish Life's flagship range of corporate pensions - are already being set up (as at May 2006) using FAF, after its introduction for corporate business last year.
FAF allows IFAs to agree with their clients a fixed amount as the initial charge for advice, giving maximum remuneration flexibility and providing a bridge between fees and initial commission. The key benefits of FAF are transparency and the opportunity to discuss the true value of the services provided by advisers to their clients.
Jim Smith, Sales Director at Scottish Life, commented:
"The proportion of IFAs taking advantage of our FAF offering has grown dramatically. In an aggressive market driven by initial commission levels which are neither sustainable nor commercially viable - according to the recent Cazalet Consulting Report, Polly Put The Kettle On - Scottish Life has clearly shown the way forward.
"Scottish Life's view is that proper advice is crucial to the successful distribution of pensions. We also firmly believe that advisers should be properly remunerated for the valuable services they provide to consumers. FAF allows this to happen in a transparent, sustainable and fair way."
FAF is an innovative remuneration facility from Scottish Life which aims to provide advisers with what they need in order to maintain and develop their business profitably. FAF was designed to offer advisers and their clients the "best of both worlds" - the transparency of a fee-based approach together with the tax-efficiency (for pension sales) and practicality of both initial and ongoing commission payments from the product. By avoiding the significant cross-subsidies which are inherent in AMC-only products, the FAF approach is fairer and clearer to customers as well as providing a sustainable business model for advisers and providers.
Benefits for customers include potentially improved projections to retirement for plans set up on a FAF basis compared with stakeholder-style AMC-only basis. In AMC-only cases, the increased annual management charge means the customer can end up paying a higher charge overall and, in corporate arrangements, cross subsidising the costs for fellow employees. Importantly, the transparency of the FAF charge also means that customers are better able to understand and value the service being provided by advisers.
- ENDS -
For further information please contact:
Scottish Life
Alasdair Buchanan, Group Head of Communications
0131 456 7133
Mainland PR
Kat Milne
020 3008 7400
Editor's Notes:
Scottish Life was founded in 1881 in Edinburgh as a proprietary company, becoming a mutual company in 1968.
On 1 July 2001, Scottish Life demutualised and transferred its business to The Royal London Mutual Insurance Society Limited. Scottish Life is a division of Royal London and is the specialist pension business within the Group, providing individual and group pensions to the market via intermediaries.
Scottish Life and Royal London's other intermediary businesses are based in Edinburgh where 1300 staff are employed, with over 240 working in other parts of the UK and overseas.
Royal London was founded in 1861, initially as a friendly society, and became a mutual life insurance company in 1908. Royal London is one of the stronger life and pension companies in the UK, with a current rating of 7/10 from Cazalet Financial Consulting, and has a particularly strong track record for with profits performance.
The Royal London Group has funds under management of £29.2 billion. Group businesses serve over 3 million customers and employ 2760 people.
