Ashok Sardana, the chief executive of Continental Financial Services, made the suggestion at the International Adviser Gulf Expert Investor Forum where he was taking part in an adviser CEO roundtable – the first of its kind in the UAE.
The panellists, who also included representatives from AES International, Globaleye, deVere, Mondial and Nexus Insurance Brokers, were discussing commission, particularly the justification for taking large up-front commission payments on 25 year savings plans.
Sardana said, given there is currently not even commission disclosure in the UAE, that 25-year savings policies “should be banned”.
Explaining his position, Sardana said the reason these policies are currently being sold is not because they offer value to the client given “99% of the clients will not see through the 25 years”, but because of the “current remuneration”.
The CEO said, rather than selling 25-year policies, advisers should sell shorter term, 10- or 15-year policies, then sell another after that time if it is still appropriate.
International Adviser put the suggestion to a few life providers who sell savings plans in the UAE.
Skandia International said it has already noticed a shift away from these longer term plans.
A spokesperson said: “We are actually seeing advisers move away from regular premium contractual policies in preference for single premium policies, this has been a gradual shift over the years without regulatory intervention.
“Regular premiums can still meet a customer need where the requirement is to take a disciplined approach to saving for a life event in the future, such as retirement, but clearly the client needs to fully understand the long term commitment before taking out such a policy.”
Meanwhile, Matt Waterfield, Friends Provident International general manager Middle East and Africa, said: “Friends Provident International offers Premier Advance for intermediaries to advise clients on investment terms ranging from five to 25 years.
“The plan is used for medium-term wealth creation through to longer-term education and retirement planning. Advisers therefore have the flexibility to select the term that best suits the needs of the customer. We have no plans to reduce the maximum term offered.”
RL360 °, which was recently subject to a management buyout from the Royal London Group, said there is a place for 25 year plans and that, having been selling regular premium business since the early 1990s, it now has a large existing book that does make it to the end of the selected term.
However, a spokesperson added the issue highlights why RL360° will only sell products through financial advisers “so that the advice is suitable from outset”.
