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&#39Icing on the cake&#39 is not so sweet for AMP

As it becomes clear that depolarisation is going to happen in a softer way than many feared, two of its most avid adherents, Zurich Financial Services and AMP, have been left in disarray.

Last week saw their respective UK chiefs – both Australians – lose their jobs. Ray Greenshields was deposed as chief executive of Zurich UK Life while AMP UK Financial Services managing director Tom Fraser found he no longer had a job after new group chief executive Andrew Mohl decided to split its UK operations into two discrete entities, mature and contemporary. Pearl is being closed to new business and is known to be considering selling the direct salesforce.

Both firms have much in common – a point accepted by Greenshields before his sudden departure. But he also added that Zurich has a market share double that of AMP&#39s 2 per cent, adding that these are percentages of a big market.

Both operations are foreign-owned, multi-distribution firms made up of disparate companies and, above all, have been two of the keenest proponents of multi-ties.

Zurich, through the Zurich Advice Network – the rebranded Allied Dunbar salesforce – has been attempting to attract IFAs daunted by their prospects post-CP121. AMP had plans to franchise its direct salesforce and at the time of its purchase of Towry Law said that depolarisation would be “the icing on the cake”.

Aifa director general Paul Smee says: “The problem with both companies&#39 business model was that they relied on the ending of depolarisation in a more radical form than is going to happen.”

Rival companies which have taken a different view on depolarisation are similarly critical.

Norwich Union director of marketing Robert Fletcher says: “Recent developments enable IFAs to make more informed decisions about multi-tying rather than be forced into them.”

Standard Life has been one of the few companies to stand aloof from the so-called scramble for distribution, taking a position that it would only act if it had to.

Marketing director Michael Leahy says: “When people first saw CP121, first of all the reaction was one of doom and gloom. It was also in some organisations&#39 interest to talk up the doom and tell people that they had to multi-tie.”

He adds that, of the distrbution acquisitions by fellow life offices, not one makes economic sense to Standard.

Some IFAs express a similar view. Hargreaves Lansdown chief executive Peter Hargreaves says: “Companies would be better off spending money on marketing rather than throwing it at lame-duck brokerages.”

Announcing his new management team at a press conference last week, Mohl said AMP is scaling back its ambitions in this country. He described the UK market as irrational and fluctuating because of regulatory uncertainty. He said the company will wait to see what the new rules are before taking action – an implied criticism of its previous strategy of attempting to pre-empt changes.

Like Fraser, Greenshields largely inherited the strategies of the operation he led in the UK. But unlike AMP, Zurich is going full steam ahead with its strategy and the loss of Greenshields is understood to be about internal performance targets rather than the company&#39s future strategic direction.

Zurich has already started implementing a new refocused strategy in the UK, losing its newly launched bank to focus on general and life insurance business.

Analyst Ned Cazalet is critical of their strategy. He says: “I do have to question if they are going to be winners in depolarisation. I don&#39t think so and I don&#39t think they will have the same number of advisers in a few years.

“Keeping the numbers up in Zan is very tricky. There is a natural attrition rate of 15 to 20 per cent a year in direct salesforces. I do not buy the idea of sufficient numbers of IFAs moving across. I can see a few doing so but not the number they need. IFAs might go for firms like Millfield and Berkeley Berry Birch where they can still feel independent.”

Canada Life recently came to the conclusion that the prospect of retaining and multi-tying its direct salesforce was unsustainable and arranged terms for its transition to IFA Lighthouse.

As one might expect, Zan sales director Andy Ferns is bullish about IFA recruitment, claiming that by the end of the year he will have attracted around 200 RIs. He adds that he is just in the process of signing another big IFA firm. He says the package of support Zurich can offer is more competitive than networks when network fees, professional indemnity insurance and other forms of support are taken into account.

Ferns says: “The big win for us on CP121 was the opportunity to gap-fill.”

He adds that price caps will affect his direct salespeople just as they affect IFAs. Commentators point out that Sandler&#39s stakeholder suite of products, intended as a modern alternative to the penny policies of yore, are commercially unattractive for the direct salesforces to which they might superficially seem suited.

Hargreaves says he is saddened by the departure of Fraser. He says: “I admire people who try and mould the industry. But undoubtedly it is safer to wait and see what happens. A lot of firms have got their fingers burnt by trying to guess the market. I do not think that anyone really knows how they are going to work in the brave new world.”

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