According to Moneyweb independent financial advisers are concerned with how Discovery deals with them – demanding that they guarantee a certain amount of business for the company before they can get codes.
The advisers are concerned that because Discovery is pressuring them to recommend Discovery products, that their independence is being compromised. If another insurer offers a better deal for one client, they shouldn’t feel that they might lose their ability to deal with Discovery for another.
The The Financial Planning Institute of Southern Africa said it was aware of the allegations and is going to engage with Discovery on the matter.
Hylton Kallner, Discovery Life CEO, denied that his company was engaging in this practice, instead they performed a ‘due diligence’ on the advisers.
There used to be a show about bosses going undercover within their organisations to see how their businesses actually operated. One of the episodes was on a large fast food chain, where the guy in charge of the whole operation went to work as a fry-cook.
The company at the time had a big book of how to do stuff, this was intended to make it easy to do things right. What that boss found however was that deviation from the big book, even with methods that made sense, led to workers suffering disciplinary action.
It was not at all how the whole thing was supposed to work but what is supposed to happen and what actually happens aren’t always the same thing.
So I look at what Kallner is saying, and I don’t think he’s lying. I think he genuinely believes that this ‘due diligence’ of his is about protecting his company’s clients.
The thing is the ‘due diligence’ includes stuff like experience in selling Discovery products, and assessments to make sure that the advisers know about those products.
This sounds like a system that creates pressure on advisers to sell those products.
The people who deal with the advisers on Discovery’s end have sales pressures of their own, and using this assessment process in that way, well I would be surprised if it didn’t happen.
Which means that the rules may well work out into an anti-competitive practice without being intended to be such.