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Distribution battle lines are drawn

Bristol & West&#39s £40m move to snap up IFA Willis National is the

latest example of a provider elbowing competitors aside in the dash for

distribution.

The move comes hard on the heels of Australian giant AMP&#39s decision to

acquire Towry Law.

Suddenly, national IFAs are looking over their shoulders in anticipation of an approach from a provider offering a golden future.

B&W has made three advi

ce-based acquisitions in the past year alone – Chase de Vere, portal

Moneyextra and now Willis National – and is still in the hunt for more,

saying it would be “very interested” if another IFA came up for sale.

AMP, despite taking flak for the Investors&#39 Compensation Scheme

intervention over Towry, is understood to be keen to develop a host of

distribution channels.

But if either company were to hit the acquisition trail again, it would be

likely to face stiff competition. B&W admits it had to fend off several

other rival bids for Willis and believes just about every mid-sized to big

provider is on the lookout for guaranteed channels to distribute their

products.

B&W director of strategy Martin Palmer says: “Advice is such a dominant

area of the market but is underserved by the major players and established

brands. I would say most are now looking to remedy this by creating

better-known IFA brands.”

Bradford & Bingley has gone some way to achieving this with the

high-profile transformation of its branch network into independent advice

centres.

B&W considers B&B to be the most prominent blip on its radar screen of

competitors but warns that the biggest players risk “cannibalising” their

core businesses if they adopt a similar buying strategy to its own.

B&W&#39s bold buying strategy has come in for considerable praise.

Pretty Technical Partnership partner Kim North says: “I think the B&W

acquisitions are very interesting and make perfect sense. The future of the

industry will be dictated by technology, independence and good products –

all things which B&W has acquired over the last year.”

Technology looks certain to be an area in which future battles will be won

or lost. B&W has been quick to state that it bought Willis to complete its

goal to offer advice from all angles and is merging the IFA with Moneyextra

to give internet, phone and face-to-face advice.

B&B has a rapidly expanding internet operation of its own with

Charcolonline, which B&W acknowledges is “not dissimilar” to its own

proposition although Charcol believes there are fundamental differences

between the two in terms of delivery of advice.

But the two banks are not alone when it comes to technology. When Misys

decided to create an IFA monolith with its acquisition of rival network DBS

last month, it was made clear from the start that their portals m-link and

Assuresoft would be merged into one. This is an area that many expect to

become the most profitable for Misys, which remains foremost a software

company.

But not everybody in the industry is pleased with the way things are

going. Mortgageforce managing director Rob Clifford says he is worried that

history may be repeating itself after witnessing the spiralling costs which

followed the hoovering up of estate agencies by banks and building

societies several years ago.

He says: “The theory of all this is good but whenever there is a fight for

distribution there are always consequences. The bidding becomes an auction

as there are usually several suitors for every distribution channel which

only serves to drive up prices.”

Birmingham Midshires head of lending Michael Bolton says: “It seems to be

fashionable to jump on this particular bandwagon but just because everybody

else is doing it does not make it right. What makes a provider believe it

can run an organisation which is completely different to its own?”

But it is not only rocketing prices which could be a concern. Many believe

the buying frenzy is at least partly stoked by moves to end polarisation.

Some parts of the newly acquired business could be used to set up

multi-tied businesses.

In the case of AMP, it says depolarisation would be the icing on the cake

but it is not clear whether this applies to its IFA purchase or perhaps

more relevantly its fund supermarket Ample.

Bristol & West is not forthcoming about what lies behind its purchases

although it says depolarisation will make little difference to the market.

On the network side, Misys and DBS have hinted that demands from members

may see them offer some type of multi-tied arrangement alongside its IFA

services.

KPMG Corporate Finance partner Richard Clarke brokered the Willis deal on

behalf of vendors Abbey National and Willis Group.

He says: “There will be more deals done by the end of the year. It is

still a highly fragmented sector with scope for further consolidation and I

would say there is still lots more activity to come.”

Despite his prediction, Clarke says he was taken aback when AMP paid

£75.7m for Towry, not so much borne of the pension liability row but

because the deal came so far in advance of the FSA&#39s depolarisation

decision.

B&W&#39s recent moves put it at an advantage if the FSA burdens the industry

with depolarisation but also gives its efforts not to get swamped by

consolidating competitors a much needed boost.

Either way, it is a win-win scenario and as long as this is the case,

providers will continue to be prepared to slug it out in the battle for

distribution.

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