From Russ Stein
I am bored by the number of letters whinging on about life offices and the strategies they adopt when a policy lapses.
The fact is that we all know (at least those who have been in this business for a reasonable length of time know) that however well sold, a percentage of life policies will fall off the books.
I would be bold enough to say that provided a client fully understands the product and has been sold the best IFA rate available at that time, the chance of a lapse is reduced. Of course, a robust missed payment chase-up system is also needed.
Although rarely used, I know some brokers who use fee waiver agreements whereby professional fees are reduced or even waived on the understanding that a policy will run for, say, 48 months. This can act as protection for potential lost income should a policy lapse.
I know how frustrating it is when all your hard work comes to nothing but on the other hand a big policy can fall into your lap which earns you a mint. That’s sales.
It’s not rocket science to put aside a proportion of any life commission earned as a slush fund to absorb the occasional clawback.
Danny Lovey (Mortgage Strategy December 11) seems to suggest that it makes financial sense to accept a lower overall commission spread over 24 months.
This shortening of the earnings period is already available via some life offices although a 30% upfront non-reclaimable commission is the stuff of cloud cuckoo land.
And I have no issue with life offices clawing back commission after retirement either. Again it’s just a matter of making provisions. But claiming back unearned commission would be a worry, and that is an issue that won’t go away.