Moonstone: Are contracts one-sided?
While on the subject of contracts; if there is one issue that has been a bone of contention ever since John Fairbairn got on his horse to introduce the concept of life insurance to the savages in the old Cape colony, this was it.
The most common complaints are invariably that it is one-sided and unfair. In all fairness: if you were the supplier, would yours be different? One could almost revert back to the old saying: he who pays the piper calls the tune, or more appropriately, he who provides the product determines the conditions under which it is distributed.
The question is though, is it at least reasonable?
This issue came to the fore again in correspondence recently shared by one of our subscribers. He received an amended contract for signature from his BC with no explanation whatsoever of the changes, or why it was implemented.
He then spent a substantial amount of time studying it, and returned it to the product house with three amendments. His commission was also held back subject to the signing of the contract, and he requested that interest be paid on the outstanding commission. He received the following reply:
Attached are extracts from the contract that you have altered and for this reason we have to withhold all commissions until either you reply to the e-mail accepting that the alteration made by yourself is null and void or a new contract has been issued and signed by yourself and two witnesses.
I understand that you have an issue with interest been paid on commissions been (sic) withheld and you are more than welcome to take the matter further but legally:
- We do not have a valid contract with you at this point in time and because of that you are seen as a non-contracted broker and
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until such time that we:
- receive your acceptance that the alterations made are null and void or
- a new unaltered contract is received we cannot do business with your practice or handle any queries you might have.
Please can you let us know if you accept this via e-mail or if a new contract has to be issued for you. In the meantime all commissions will have to remain with us.
The email went on to say that he receives upfront annualised commission and no request for interest would be entertained.
Our reader responded as follows:
Until such time as the new contract is signed the old contract exists. New rules do apply, I accept, to new business and you are entitled to refuse acceptance thereof (but not accept and refuse to pay commission thereon). The commission being withheld is on old existing business.
On the same day he received confirmation that the commission was paid over, but no mention was made of the interest requested.
The FSP in question has contracts with a number of product houses which allows him to recommend what he considers the most appropriate product for a specific client’s needs. Like so many others, this means that he is not seen by any of the product providers as major producer, and as such his service from the product houses have been downscaled substantially, resulting in a lot more work for him which, in the past, was supplied by the product house.
At the risk of sounding like a whinging “when-we” I must admit that relationships were a lot more amiable ten years ago. I suspect that those who place the majority of their business with one supplier still enjoys this congenial relationship.
The question that this raises is of course whether this is in the best interest of the client.
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