15 / 07 / 21

Q&A with David Downie

David Downie left the sunny shores of Trinidad and Tobago to seek a career in actuarial science having gained a financial scholarship to study in England. He trained with two of the largest consulting actuarial firms in the UK and is now responsible for all actuarial services provided by Embark Actuarial and its parent company, the Embark Group.

We sat down with David to ask him a few questions about his career to date, his experiences and expertise as well as his thoughts on the pre-paid funeral market.

Welcome, David.

Thanks, nice to be here.

In simple terms, what is your job?

I’m an actuary, and an independent adviser to Prosperous Life. When customer payments are made for future funerals, they are held in Trust. I take ownership and responsibility to value the assets of the Trust, and to verify and calculate the liabilities held by the Trust on behalf of the Trustees. I effectively try to ensure that the finances of the Trust remain healthy at all times. The Financial Conduct Authority (FCA) sees an actuary as being a very important person in the regulatory process, and of course the pre-paid funeral plan industry comes under FCA regulation in 2022.

What made you decide to work with Prosperous Life?

Prosperous Life approached me some years back. They had a Trust they were looking after and required advice. I visited them at their headquarters in Cheadle, Greater Manchester, because I wanted an in-person assessment of the operation. It looked, and was, extremely professional. They explained they saw some benefits in having their own Trust, and I ensured they proceeded correctly.

Do you provide guidance for the consumer or for the company?

I advise the Trustees, but therefore indirectly and necessarily to the company which holds the Trust. But I enjoy bringing my knowledge to the marketplace, and therefore the company, so indirectly to the consumer based on best interests. But should I see any conflict of interest between company and Trustees, I will side with the Trustees.

What is your view on the current state of the pre-paid funeral plan industry?

The FCA has been given a task, at a fairly late stage, but has done a good job of learning about the industry over the past 18 months. It has taken on board a lot of comments about a market which has had a great deal of criticism for the way plans were sold through resellers. But the market has been cleaning itself up, and most funeral plan providers correct the mistakes they make. In fairness, there’s hardly any complaints to the Funeral Planning Authority against the 200,000 or so plans bought each year. However, forthcoming regulation is a good thing, and it will ensure the weeding out of companies which are not fully complying.

What does FCA regulation of the funeral plan industry mean for the industry, but, importantly, for the consumer?

There is an element of financial risk to the consumer buying a pre-paid funeral plan, but it is tiny, and will reduce even further with regulation. It is nothing compared to the risk in, say, the pensions industry. By comparison, the risk of loss relating to a pre-paid funeral plan is perhaps £4,000 to £5,000, whereas the risk of loss relating to the payment of an annual pension could be hundreds of thousands of pounds. I expect perhaps half-a-dozen or so – 10% to 15% of the providers – to fall short of being able to progress into regulated status. There could be a small financial risk associated with some of them not crossing the finishing line in time and being forced to shut down, but other funeral plan businesses are likely to step in and take over the Trusts or customer bases.

In your view, what are the challenges facing the industry today but also in the future?

The big challenge is that as many pre-paid funeral plan providers get approved and through into regulated status. Once they are all approved, then that means there can be more and freer movement of plans between providers because they will all have the same standards and processes. If it becomes apparent that a provider is underfunded, then another can step in. Sales methods will also improve. The FCA is looking at how to address the situation in which the vast majority of the current market involves reselling plans through agents who are on commission, and there is therefore some debate about the commission structure of some of those arrangements. It’s still a young market, though. But it has the potential to be a great market for all involved or touched by it, and will improve with FCA regulation coupled with the associated financial compensation scheme should anything go wrong.

A couple of years ago Prosperous Life was featured in a negative story in the media. Did that have any impact on your decision to join?

The period over which this article was based coincided with my visit to the office. What was reported was different from what I saw. I saw no untoward behaviour – I saw incentives to staff in a very young company, and a disgruntled employee under disciplinary scrutiny making allegations of sharp selling practice which I could not see. From an actuary’s point of view I asked whether it affected my professional responsibility to the Trust, or the people who had bought or were about to buy pre-paid plans. I had no concerns. Nevertheless, that was a different era two years previous, with a business which now has nearly ten times the headcount, and a very high employee retention level.

Do you think Covid has changed the way the consumer now thinks about planning funerals?

Yes. The proportion of cremations has moved from 5% to around 15% or more. Sales of full funerals are dominant, but more people want a simpler style of funeral, with as little hassle as possible – ideal for a correctly-provided pre-paid funeral offering. But there is still a lot of families who will go for the “normal” burials.

What are you most looking forward to in the next 12 months?

As an actuary, from a professional perspective I am looking forward to seeing how many pre-paid funeral providers get FCA regulatory approval. At the moment, the FCA is doing a good job of getting on top of things, but there’s still some loose wording in the FCA funeral planners’ rulebook which I’m sure will be tightened up and become more specific. I’m particularly interested in seeing how the issue of sales commissions and funeral plan resellers is tackled.

Thanks for your time today, David.

You’re very welcome.

David Downie is a qualified actuary with over 25 years of experience in pensions consultancy.

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