Te high-profile link-up between Legal & General and Barclays, has left IFAs wondering where this leaves L&G's commitment to the intermediary channel.
The industry may see a torrent of further link-ups bet ween other banks and life offices if, as L&G chief executive David Prosser predicts, the alliance will become the bancassurance model of the future.
If Prosser's prophecy bec omes reality,where IFAs will fit in with providing financial prod ucts and services?
The Barclays' deal means that, from April, L&G will provide Barclays customers with stakeholder pensions.
It also means that, from the second half of this year, subject to FSA approval, Barclays will offer customers the full range of L&G's life, pension and fund products.
The move will lead to 750 job losses and the closing to new business of Barclays Life, Barclays Funds and b2 from the second half of this year, while the unit trust business will be transferred to L&G.
Some pundits have been surprised by the move, particularly after the publicity gene rated by Barclays' aggres sively priced stakeholder proposition launched in the second half of 2000, which offered a nil charge for the first year.
One pension expert says: “I find it surprising. After investing millions in developing its own aggressively-pri ced stakeholder off ering, it seems strange that Barclays deci ded to abandon this in favour of L&G's. It begs the question of where it thought its strategy was going.”
But the U-turn makes sense in terms of econo mies of scale and greater control for both parties.
Some IFAs believe the latest development is another attempt by life offices to try and control distribution channels and some expect increasing consolidation between banks and life offices.
Informed Choice managing director Nick Bamford says: “The IFA channel is horrendously difficult to control because we can vote with our feet if we are not satisfied with the products or services. We can take our business to other providers, which is a problem that does not face bancassurance distribution.”
Pension technology pro vider pensionsbusiness.com chief executive officer Mich ael Lockyer says: “This is an example of further contraction of the market and it is inev itable the players will only get bigger under the planned cha nges to polarisation.”
Maddison Monetary Management managing director Mark Howard says: “This makes a lot of sense as it redu ces Barclays' cost base significantly in one swift move.”
The tie-up has added fuel to the argument that the current consultation on chan ging the polarisation regime is a sham and changes which will allow the banks room to push more products are a done deal with the Gov ernment and regulator.
Advisory & Brokerage Ser vices managing director Gar eth Marr says: “From my understanding, Barclays cannot offer L&G's full product range unless the rules on polarisation change. It makes you wonder how serious the Government is about the current consultation at a time when the regulator's and Gov ernment's competence is already in question.”
If L&G has set the trend, will Prosser's “model of the fut ure” become commonplace?
Life office analyst Ned Caza let is unconvinced. He says: “This prediction is rubbish because different bancassurers run on different mod els in terms of remuneration, pay and other areas.
“For example, the Nat West model is quite similar to Barclays but very different from Abbey Nat ional.”
Howard says: “This is not a new thing, it is a re-engineered model.”
Following the announcement, Money Marketing rec eived calls from IFAs who wanted to know if L&G is planning to sideline the IFA channel.
L&G told MM that the IFA channel accounts for more than half of its business and it claims that the alliance with Barclays is an endorsement of this success.
It says it is not shifting focus and will be making an announcement in the next two weeks on a service proposition which focuses on the IFA market.
L&G spokesman John Mor gan says: “L&G has always been a multi-channel distributor. This tied arrangement is the same as we already have with Northern Rock. This move will benefit IFAs indirectly because the scale of the operation spreads the cost base, which will allow us to build on our competitive success in the IFA market.”
IFAs are optimistic this is not yet another chapter in the Death of the IFA story.
Howard says: “This is not the death knell for IFAs. Banks have not been able to get their financial services sorted out so far.”
Lockyer says: “IFAs will always provide something different. People will want to sit down with a professional and have the financial issues exp lained to them. IFAs need to shout from the rooftops that brands are available from them but with added value.”
My Money Adviser managing director Ann-Marie Mar tyn says: “This is an exam ple of the new breed of competition that the IFA will face in the future. IFAs will find it increasingly difficult to compete for business unless they embrace technology.”
Marr sums up the feelings many consumers may have towards their bank when he says: “Who wants to buy their financial products from the banks? They are the ones who send you stroppy letters and fine you if you are £10 overdrawn.”