‘Conflict of interest’ flagged
ADAMANT THAT NEW CONTRACTS ARE NOT DEPENDENT ON BUSINESS VOLUMES
Advisors believe company is not in line with Retail Distribution Review proposals.
Independent financial advisors say they get blackballed if they don’t agree to send more business Discovery’s way. Independent financial advisors (IFAs) have expressed concern about practices at Discovery they believe aren’t in line with the Retail Distribution Review (RDR) or Treating Customers Fairly (TCF) frameworks, and which compromise their independence.
One anonymous financial advisor says when their firm wanted to obtain codes (contracts) for two new planners, Discovery Consulting Franchise (DCF) didn’t want to issue more codes unless the advisors committed to writing a certain amount of business.
They then approached Discovery’s self-service centre for new codes so they could service clients with existing Discovery products.
But since they indicated that they’d only recommend a new Discovery product where it was in the client’s best interest and weren’t fully bought into the firm’s offering, they were unsuccessful.
The advisor says this is “incredibly problematic” because it means they can’t service existing Discovery clients without some commitment to write future business.
She believes this isn’t in line with the RDR proposals as planners may be recommending products because they have a contract with Discovery, not because it’s in the client’s best interests.
Another independent advisor, who charges a monthly or once-off fee and not commission, says the franchise previously required him to commit to a certain amount of business, but because he couldn’t, he was referred to the direct service channel.
After about a year of servicing Discovery medical aid clients this way, Discovery started questioning why he wasn’t recommending other products. “I told them the client did not need it,” he said.
The call centre later advised that his contract had been cancelled.
The advisor says he’s still awaiting written feedback, and in the meantime can’t service his current Discovery clients.
The Financial Planning Institute of Southern Africa (FPI) says it’s aware of the concerns and will be engaging with Discovery to try and understand its position.
The FPI’s David Kop says in terms of the RDR proposals the setting of targets by product suppliers for independent advisors is a concern because it creates a conflict of interest.
Discovery Life CEO Hylton Kallner says it doesn’t require an IFA to commit to a certain volume of new business when applying for a new code or contract.
Kallner says in granting a new advisor contract or assessing an ongoing contractual relationship with an existing financial advisor, Discovery considers several factors.
Kallner says: “We do not require our IFAs to write a specific number of new business cases over a specific period to maintain their contract with us.
“But we do monitor that IFAs update and service existing policies on an annual basis – in line with the principles of providing clients with the best advice.”