Opening windows to the outside world

When Trevor Matthews was headhunted to run Standard Life’s loss-making operation in 2004, he did not feel the challenge he faced was insurmountable, after having re-shaped the Manulife insurance company in Canada and Japan. Yet there was a lot of bad news he had to give staff, clients and intermediaries. He decided to package all of this into one announcement. “I spent the first 100 days talking to people inside and outside the company, and packaging the news seemed the right thing to do,” says Mr Matthews, who admits there may still be more bad news in the future. Firstly, he had to convince staff and customers that the forthcoming demutualisation was the best way forward. And this not long after Standard Life had promised it would always retain its mutual status. Then there were the bonus cuts to end clients and the commission cuts to advisers selling regular premium business. Add in a round of redundancies, a cost-cutting programme aimed to make the company more attractive to institutional investors in the forthcoming flotation, and you could understand if Mr Matthews name was mud in his Lothian Road headquarters. But that is far from the case in reality. His staff, many of whom are veterans of the stuffy Scottish life industry, describe him as a “breath of fresh air” and the door to his office remains open. “We had no global outlook before, which is why we had problems,” says one senior source. “Trevor is not afraid of the outside world.” Unfortunately, the reaction was not a uniform one, with some IFAs in particular being aggrieved with their high-commission lifeline being cut. “Some advisers were almost violently angry with the reduction in initial commissions,” remembers Mr Matthews. “Others were non-plussed as they were already moving towards an alternative business model. Most advisers would agree that the old model of high initial commissions and high intensity sales is about to be broken, and it makes sense to follow our new business model. “In this country, there is an amazing focus on charges, out of all proportion to what their impact is. But there are other issues, which are far more important. Structuring the person’s financial life, where to put money in and how much – these should be the big issues. Our experience in other countries is that people are happy to pay a reasonable level of charges if the service is good. In this country, the level of charges is too low, and there is no evidence that customer have benefited from this.” The new model laid down by Mr Matthews, involves a system of advisers, both independents and within banks, qualified and educated, giving holistic advice for a fee and selecting funds from wrap programmes or specially constructed platforms. “Wrap platforms have transformed the financial world, and I think they will have a huge impact here in due course. The life insurance salesmen of 20 years ago are re-inventing themselves, after some study, as financial planners.”