One of the "delightful" things about too many of the people in the life assurance industry is that when they cannot answer legitimate questions about unacceptable practices or are shown to be involved in them, they resort to vilification.
On top of this, respectable com-panies seem prepared to do almost anything but act in what should be your best interests.
Currently, I am being subjected to a petty poison pen and whispering campaign because for years we have argued against non-cash incentives, particularly luxury overseas trips, for intermediaries.
As I have pointed out often enough, these luxury trips are based on intermediaries achieving sales targets. So, unscrupulous advisers will sell a particular company's products merely to qualify for a free trip. The next year, they will sell some other company's products. Whether the products are in your best interest or not too often does not enter the picture.
I am not saying that everyone who qualifies for these trips is crooked. Some qualify because they are doing the right thing. The problem is that the trips create a huge window of opportunity for the unscrupulous.
What has got up the noses of a number of people is that following the long campaign Personal Finance has conducted against these perverse incentives, the Financial Services Board (FSB) is now considering banning non-cash incentives.
Rumours and innuendoes
The response of those in favour of the trips has been to start a poison pen and whispering campaign against me.
The campaign is being conducted in three ways:
- Via anonymous emails being posted on the Moneyweb website. This was sparked after Moneyweb severely criticised a free junket to Reunion recently arranged by Absa Bank for a number of newspaper editors. I was not invited, and I would not have accepted even if I had been.
- By way of an unsigned letter being mailed to various people or institutions of influence, such as the FSB. (The letter has the Moneyweb emails attached to it.)
- In a whispering campaign being conducted by a senior executive of Old Mutual.
All three approaches have much the same content, namely:
- I accepted an invitation from an Old Mutual executive for my wife and myself to attend a champagne tasting about four years ago. According to the email posted on Moneyweb, the tickets cost R400 each. The question posed is, was this a bribe? No, it was not a bribe. I had a long association with the executive and we met socially on numerous occasions. In fact, he went out of his way to assure me that this was not an "Old Mutual" invitation.
- The advertising division of Independent Newspapers has:
* Provided stainless steel coffee mugs engraved with the Personal Finance logo to the executives of advertising companies; and
* Provided an overseas trip to "a couple of rugby matches around South Africa and a World Cup rugby match in London".
The claims are correct. I have no real problem with the coffee mugs, although our policy at Personal Finance is not to accept gifts. If we receive gifts, we auction them at the end of the year and give the money to charity, mainly the Red Cross Children's Hospital in Cape Town.
I do not agree with excessive incentives, such as freebie trips. As the editor of Personal Finance, I have been very firm about this issue. Our staff do not accept free trips. If we think an event is worth attending, we pay our own way. The only free things we accept are lunches on a reciprocal basis, training sessions and an occasional invitation to a cultural event.
I have no say in the policies of other divisions and publications within Independent Newspapers, but at Personal Finance we have very clear policies on these issues.
But the point that these anonymous poison pen types miss is that the trips given to financial advisers are conditional on sales. If the financial adviser does not sell enough, there is no trip.
The trips provided by Independent Newspapers, albeit unacceptable in my view, were not conditional.
What really gets up my nose about all this is that the leading financial services company in this country, Old Mutual, has pandered to these unscrupulous brokers.
One of Old Mutual's senior executives is involved in this unseemly and petty campaign of vilification (not for the first time, I might add).
For years, Old Mutual has been ducking and diving about these incentive trips. Only last month, it sent a group of financial advisers and their spouses, as well as senior Old Mutual staff and their spouses, on a junket to South America.
The cynic in me says that Old Mutual, faced with a FSB ban on the trips, has announced that the South American trip is the last.
Pulling the rug out
But let me tell you what Old Mutual does to independent brokers who do not meet sales targets: It removes their sales contracts and does not service them.
I had a case this week of a broker, who services mainly pensioners - and thus do not create much new business - under threat of not having his Old Mutual sales contract renewed. In other words, Old Mutual does not want to provide him with the normal support services. The fact that this broker is prepared to give his time to assist elderly Old Mutual policyholders seems to escape Old Mutual.
As I pointed out recently, Old Mutual is so keen to curry favour with financial advisers that it plays a double game. It was part of the group of life assurance companies that put together a proposal to move away from the practice of paying upfront commissions (another perverse incentive to mis-sell).
But now it makes statements in industry publications that it was not happy with the proposals.
This is the same company that recently refused to provide me with information (on which it later backtracked), because I had dared to point out to you that Old Mutual was not acting in your best interests when it claimed that it was not necessary for its sales force tell you about its superior unit trust retirement annuity.
Instead, Old Mutual only wants you to know about its more expensive Max product. At the time, I received a three-page letter from Old Mutual berating me merely because I felt it was in your best interests to know about the far better unit trust product (which is extensively used by Old Mutual staff). So desperate has Old Mutual been to hide this product from you that it has toddled off to the FSB to ask for a ruling that it does not have to tell you about the unit trust retirement product.
Old Mutual has created a complex company structure so that one wing can divorce itself from another, and Old Mutual can claim that it meets the requirements of the Financial Advisory and Intermediary Services Act to provide appropriate advice in "not" telling you about the best product.
And this is the company that claims it is "with you every step of the way".
The litany of examples I have of Old Mutual not being with "you every step of the way" is extensive. In my 10 years of editing Personal Finance, I have not come across another company that comes anywhere near Old Mutual in using legal semantics to escape "being with you every step of the way". Nor have I experienced a company that does so much to avoid answering legitimate questions that may embarrass it.
Old Mutual has a lot to learn about ethics. It is hardly surprising that Personal Finance receives so many complaints from dissatisfied Old Mutual policyholders.
The solution for Old Mutual is to put policyholders first by ensuring we get the simple, low-cost and fully transparent products we need.