The IoM Code of Conduct is due to come into force on 1 January 2018, introducing full commission disclosure worldwide for international life companies based on the IoM.
When first announced in July, there was concern that companies falling under the Code of Conduct’s purview could see some loss of competitive advantage against those not covered by the disclosure requirement.
Karen Badgerow, chief executive of the IoM’s Financial Services Authority, said the regulator was “well aware” that locally-based life companies could be at a disadvantage.
Highlighting the industry-wide shift towards greater transparency, Badgerow said: “We are not a first mover on this by any stretch of the imagination. It’s great the UAE is moving, too.”
Cross-border companies most affected
Clive Baker, chief executive of Zurich International Life, said companies operating cross-border in the UAE stood to be the most affected by the code.
Though still in draft form at time of going to press, the UAE regulations mean firms operating cross-border in the region, but not subject to the IoM’s Code of Conduct, such as MetLife and Generali, would face similar disclosure requirements, said Baker.
Life companies selling directly into the UK, such as Canada Life International, and those operating via a branch network, as Zurich does, are not really impacted by the changes, he said.
Describing the Code of Conduct and UAE regulatory changes as “pivotal events” for the international life industry, Utmost Wealth Solution’s head of proposition, Simon Willoughby, has concerns over the changes.
He said: “The industry in the UAE could take a hit and, if it recovers, it may look very different.”
He added that life companies must take a leading role in supporting advisers transitioning towards greater transparency.
“People have been pursuing a flawed strategy. Companies must shift their proposition more to the client, but some in the industry are confused about who the client is and think it is the distributer.”
The industry must do more to help recruit and train “farmer advisers” who tend to clients on a continuous basis, rather than “hunter advisers” who target clients for a single transaction and move on, said Willoughby.
“In hard cash terms, this could mean that life companies are subsidising the transition to the new model.”
He is concerned, however, that time is being wasted as providers and advisers refuse to change their behaviour in engaging with end clients.