Product provider investment in IFAs calls into question the independence of the advisory firm, according to Standard Life group chief executive Sandy Crombie, who says Standard would never consider such a move.
Speaking to Money Marketing this week, Crombie said that product provider investment – common in recent years as manufacturers and distributors have tried to second-guess the outcome of the polarisation review – colours the relationship between the two parties.
He said that Standard Life would only ever make any investment based on potential returns and not in any attempt to control distribution.
Crombie went on to say that a big company like Standard could not possibly know how to best run an “entrepreneurial business” like an IFA and it would be “arrogant to suggest it did”.
He said Standard would compete aggressively to be on multi-tie panels but only on merit, rejecting any suggestion it would agree to pay cash or other benefits to appear on a panel, as has been rumoured to be occurring in some quarters.
Crombie said: “My personal view is that we should invest in things that stack up on investment growth. I do not think that I should be investing in IFA businesses for strategic reasons. We cannot add value to that. I think it does colour the relationship. We should not be investing directly in the shares of IFA business. In this business, quite often, we do well by not doing things.”
Positive Solutions chief executive David Harrison says: “I have some sympathy for the view that when a provider takes a small stake in an IFA it is done in preparation of multi-ties.
“That needs to be differentiated between an outright purchase or a holding company relationship where it could be considered that a pound invested in distribution would be better spent than a pound invested in manufacturing.”
FSA warning letter, p8; Interview, p17