Friend for life
The only real differentiator between providers is in execution and delivery, says Andy Briggs, Friends Life’s new chief executive. John Greenwood finds out how he plans to achieve this
It is fair to say Andy Briggs’ resignation from Lloyds Banking Group at the beginning of the year to take over the role of chief executive of Friends Life kicked off a bout of musical chairs in the boardrooms of UK life offices.
The following months saw Trevor Matthews move from Friends Life to Aviva, Paul McMahon move from Friends to Aegon and Toby Strauss go from Aviva to head up Scottish Widows. So with every provider seemingly having the inside track on their competitors’ business model by virtue of the fact that their top brass used to work for them, how can one offer something different?
“You can’t,” is the straightforward answer from Briggs, who also previously headed up Scottish Widows. “Instead, it’s all in the execution. We all know what the opposition are doing anyway. You look at the analyst presentations and listen to what intermediaries say about what competitors are saying to them. But in the corporate market there is not a huge amount to differentiate what different players are trying to do. It comes down to quality of execution at the end of the day.”
Briggs is frank about what quality of execution means when it comes to the merging of the Friends Provident and Axa UK life businesses.
“When we brought together the Friends Provident and Axa businesses it was clear the strength of the platform in Friends Provident and the efficiency of the cost base there was so much stronger than that in the Axa business. Where the Axa business was strong was in people so we took those people. Axa has got some good clients but there is a lot of manual work on systems and processes, and hence it is relatively high cost and poor margin. So we are migrating these schemes on to the Heritage Friends Provident platform, which is our go-forward platform.
Heritage Axa will have talked about a strategy that is not dissimilar to Friends Provident or Standard Life or whoever have been talking about, but they just haven’t executed it as well, apart from the calibre of people.”
Splitting the Friends Life business between open and closed books is about rationalising the business the provider has, which in part means segmenting the intermediaries into those Friends wants a growing relationship with in future and those it is less interested in.
The project will see live group pensions sold by IFAs with whom it has done only occasional business placed into the legacy business, while its core target intermediaries will be dealt with through its New Generation Pensions platform.
“We have got a number of initial commission small employer schemes run by small generalist IFAs on the heritage Axa platform and they will sit in the UK pensions heritage business. Because they are not one of the employee benefit consultants that we are working with going forward actively they are not on the NGP, which is our go-forward platform” says Briggs, who also has the Friends Provident International and Sesame Bankhall operations under his brief.
“It’s not about cutting costs or reducing service standards, it is about being better able to meet the needs of those customers. Our driver there is retention so if we do a better job of meeting their needs we can drive value.”
Briggs denies the claims of those in the industry who say these clients and advisers will get a poor experience as a result of the split.
“These clients are still important to us. A lot of this is initial commission business, so we have forked out the commission, and so we need to keep those clients over the longer term to make that pay. They are still important to us but the nature of the relationship management there is going to be different by definition,” says Briggs.
As to pledging to pay commission on existing schemes going forward, Briggs is less forceful than some providers in the market. “We will see how the market develops in terms of how that plays through.”
“I strongly believe that advisers in the UK in the main do a really good job by clients and ought to stand up and say ’what we do is hugely valuable’ and articulate clearly why the client should pay for that”
Looking ahead, auto-enrolment is an obvious priority for Briggs. But again, the problem is the same for everyone it will be the execution that counts.
“Automatic enrolment has become complex, and it is important that advisers can help employers to enrol the right people in the right way, and to make sure that happens in an efficient way so that employers are in the right position to be able to provide the correct MI that they will be required to. And on top of that we need to get the right education in place to help these people, many of whom will be saving for the first time, to understand what they are doing.
“We are also actively talking to Nest about that hub being able to point people to Nest and manage the payroll into Nest.”
Briggs sees a range of structures for consultancy charging being made available to intermediaries to meet the requirements of the RDR, and, like other providers, will leave it to the adviser to decide the shape. But, like other providers, it is planning some decency levels beyond which it will not permit consultancy charges to operate through its products.
“We are expecting to adopt a ’soft’ cap, meaning we would set limits we feel reasonable maximums in normal circumstances based on our TCF judgement of what would be the most that an adviser could reasonably charge,” he says. This could involve asking advisers to justify why they were charging more than the cap permits. “But I strongly believe that advisers in the UK in the main do a really good job by clients and ought to stand up and say ’what we do is hugely valuable’ and articulate clearly why the client should pay for that,” he says.
Will Friends go direct to the employer in future?
“No not to any significant degree. Our view is that most decent employers will want to get independent advice on their pension arrangements and rightly so. This is not something we do. Our role in the value chain is to provide the platform and the solutions.
“We are happy to have a dialogue with the employer on the administration of the scheme if the adviser doesn’t want to do it themselves.
“But we are not going to openly court direct business to any significant degree. I am not saying we will not have it as a facility, but if you look at our business plan our view is most employers want independent advice from EBCs and corporate advisers and rightly so,” he says.
But Briggs does see huge opportunities for direct sales through corporate wrap, and confirms that Friends’ My Money offering, that will start off with pension and Isa and in future offer protection as well, will be launched by Christmas.
“Our view is that most decent employers will want to get independent advice on their pensionarrangements and rightly so. Our role in the value chain is to provide the platform and the solutions”
“There is real potential for the worksite to become a major distribution channel because it has a huge number of advantages. First of all, through payroll and so on you have far better data on employees from a marketing perspective. Secondly, you have far better access, which can be online or through presentations in the workplace. And thirdly, you have a prior endorsement to help overcome the trust barrier that a number of consumers currently feel.
“So all of these are reasons why the work site has got a strength compared to IFA or bancassurance distribution,” says Briggs.
That opportunity is already there, so why has it not happened yet to any significant degree?
“For me it is just a question of time. The RDR has a significant impact on the ability of banks or retail IFAs to deal with those mass-market customers. And automatic enrolment is also a key driver in this because it will get a lot more people engaged in the workplace,” he says.
Briggs describes corporate wrap as a consulting opportunity for intermediaries.
“From an adviser’s perspective, some of the real benefits are that it has a highly configurable front-end which gives significant opportunities for advisers in terms of consulting how clients then configure and set this up. There are range of options around MI so advisers can make sure they meet the needs of their clients. There is a lot of education, and tools and guidance there with which the adviser can integrate their tools and guidance. So we are more focused on trying to see what the advisers are looking to do and giving them a platform that enables them to do that with their clients,” says Briggs.
So with the corporate space competing with the high street banks, and in light of Australian senator Nick Sherry’s recent prediction that in four or five years Super fund subsidiaries of that country’s major banks will be bigger than the banks themselves, will we see renewed interest in the corporate market in the UK from banks in the workplace? With the exception of HSBC, Briggs thinks not.
“The market is moving in the other direction. Banks want to stick to banking. It is challenging to see how banks will develop the capability to compete with pension providers, EBCs or corporate advisers in advising employers and businesses on their pension arrangements. There is a huge capability gap and it is hard to see how they can bridge that.”
“And Basel III will probably make it less rather than more attractive for banks to own insurance companies, so if banks are focused on insurance they will focus on the individual protection on the retail side,” says Briggs.
Friends is also looking to build up its presence in the group risk market, as evidenced by its acquisition of Bupa Health Assurance. Its proposition now aims to improve its group life, IP and CIC offerings through added-value services aimed at promoting health and preventing illness, including an EAP, access to Best Doctors for CIC customers and a 24-hour seven-days-a-week health information service provided by Bupa HealthLine.
As with the NGP platform on the pensions side, the Bupa platform will be the go-forward platform for group risk, with all new business being migrated onto it on renewal from 2012.
Friends is also looking to play a big role in the at-retirement market. With £2bn of pension assets maturing each year and 75 per cent of that figure walking out the door, it is easy to see why.
“The number of suppliers has reduced in the open market option area as players have pulled out. So it is a key area for us and there are a number of strands to that first of all building the capability, so we have hired David Still as director of retirement income and Richard Willetts as director of longevity, building a really strong capability,” says Briggs.
Friends will not be launching into the open market option arena for 12 to 18 months, but Briggs is bullish about the prospects when it does.
“People are concerned that Solvency II will have a big impact on capital requirements on existing books. But obviously we do not have that problem because we do not have that much annuity business. We do expect the market to reprice to reflect the capital market requirements that will emerge going forward,” says Briggs.
“We will not have the weight of the past, but we will have the opportunity of the future.”
All about andy briggs
January 2007 Joined Lloyds Banking Group as Managing Director, Marketing and Distribution in Scottish Widows.
December 2008 CEO of Scottish Widows
February 2010 CEO of Lloyds Banking Group’s General Insurance businesses,
Previously spent 19 years at Prudential Group. culminating as CEO of the Retirement Income business
Married with two daughters aged 19 and 17, and two sons aged 3 and 1.
Enjoys rugby and golf