In an article for Money Marketing’s Cracking the Crunch website, Ward questions whether intermediaries are equipped to move into the retail savings market.
His comments follow Edeus’s partnership with Newcastle Building Society which will see it offer two savings products to its broker database. It has promised a procuration fee of up to 2.75 per cent of the deposit.
Edeus says intermediaries do not need FSA investment permission or to produce a key features document as the products are sold on an informed choice basis.
Ward says: “How many int-ermediaries have successfully integrated treating customers fairly into their businesses and are equipped to move into this product arena? It is asking new questions of their distribution.” He says he is interested to see what impact the retail distribution review will have on this idea.
Ward believes these former lenders must see the wave as just a way of earning commission. He says: “By selling a building society bond, branded as its own, it uses its broking distribution database to sell the products. The broker gets commission, it gets some too, and the institution gets its funds – a kind of savings packager.”
“I must conclude it is a temporary measure, not least because no savings product provider wants to pay two sets of commission when it can get away with one.
“In cash-hungry businesses such as brokers, business turnover is everything but is it sustainable in the longer term?”