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Advisers wary of Friends’ deal

Advisers are worried that Resolution’s proposed acquisition of the bulk of Axa UK’s life insurance arm could lead to lower service levels.

The £2.75bn reverse takeover deal would create one of the UK’s biggest protection and group pension providers and would trade under the Friends Provident name. Resolution bought Friends for £1.9bn last August and is looking to consolidate a number of providers before a flotation by the end of 2012.

Axa’s wealth management arm, including multi-manager business Architas, the Elevate wrap, Axa Isle of Man and the Axa Winterthur Wealth Management specialist pensions and investment operations, are not part of the deal. The acquisition also excludes IFA arm Bluefin, Axa’s health and general insurance businesses and Axa Investment Managers.

Axxis Financial Planning director Owen Wintersgill says: “It is a shame that companies like Resolution are hoovering up firms like this. You find that service deteriorates and fund performance deteriorates with these type of deals.”

CBK Colchester director Peter Chadborn says the deal does not raise any competition concerns in the protection market but he shares Wintersgill’s concerns over service.

He says: “What worries me is that bigger companies inevitably mean poorer service. We saw it happen with Aviva that the company grew and the service levels dropped and this proposed takeover is a similar situation.”

Kevin Carr Consulting managing director Kevin Carr says: “We need companies that are strong and have got the capital to invest to drive the market forward but you also need good service. Sometimes, that capital can deliver good service, but sometimes the bigger the company the worse the service is.”

Highclere Financial Services partner Alan Lakey says some positives could come out of the deal. He says: “Friends has shown a lack of appetite to upgrade its offering for some time. It has gone from being a market leader, certainly in terms of income protection, to almost an also ran. This deal could be one way of boosting its offering.”

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