The level of change being driven by the retail distribution review is equalled only by the implementation of the original Financial Services Act and the introduction of polarisation in 1987.
For anyone looking at which life offices were most successful in supporting multiple distribution channels the last time, as a guide to success over the next 12 months, it would be hard to think of a company that achieved more than Legal & General.
A quarter of a century ago, the company pretty much called every play right, successfully maintaining a substantial presence in the IFA market while operating an effective direct salesforce, which is one of the very few that survive to this day. At the same time, it avoided the worst excesses of estate agent acquisition and continued through L&G Mortgage Club to be one of the most significant distribution partnerships in the industry.
Having looked at many providers and platforms’ RDR plans in recent months, time spent with L&G has made it clear to me that it seems to have identified some unique approaches I have not come across elsewhere and which offer insight into the company’s prospects for future success.
Its work to help advisers prepare for the RDR has been approached on an invitation-only basis from advisers’ local contacts through the L&G Business Club. Established around three years ago, the objective has been to take advisers through a wider review of their businesses, helping them to future-proof for the challenges ahead.
I am told there has been considerable success and that participating firms have achieved tangible changes in their businesses. These include not just increased levels of business written but, more important, an overall rise in profits. At the same time, many have been able to implement more flexible management structures in readiness for the evolving market.
The company ascribes much of the success of this process to the structured nature of the activities. New organisations are only able to join during specific intake periods, which leads to greater control over the operation of the programme.
In addition to other platform-related activity, such as the evolution of Suffolk Life and its shareholding in Cofunds, L&G is pursuing the platform market from an angle I have not seen adopted extensively elsewhere.
It is building into its products the ability to switch from platform to platform, effectively as part of a re-registration exercise. Pointing out that the FSA is treating a platform switch as a non-advised activity, that is, one for which ongoing trail commission can continue to be paid, the company has structured its products so an adviser can choose to move between platforms without the need to rewrite the pension contract.
These facilities are available both for the Suffolk Life Sipp and L&G’s International bond. Currently, the Suffolk Life Master Sipp can be accommodated as a transferable product in its own right on the Seven IM, Ascentric, Ascentric IFDL White Label, Cofunds, Fidelity Funds Network, James Brearley, Raymond James, Parmenion, SEI (including Cavanagh and True Potential) and Transact platforms. The Suffolk Life Smart Sipp is available on nearly all of the above and several also offer the L&G offshore bond.
For the past nine months, all its life and pension investment products, that is, the L&G select portfolio bond, international portfolio bond, portfolio plus pension and Sipp, as well as the Suffolk Life range, have had an entirely clean charging structure, although the company will be further updating the products to support adviser-charging.
It expects to do more work with advisory firms in the near future to understand the impact of taking advice charges out of products, for example, the tax implications of taking adviser charges from bonds. It believes this is an area where it is important to communicate clearly and, where necessary, educate.
L&G is also creating some special propositions to help advisers work with mass-market clients who are no longer profitable for face- to-face advice. The company believes it is a myth that advisers only deal with affluent clients and see it as essential to find ways for advisers to work with the less wealthy.
For those who are open-minded enough to consider it, this may mean contemplating entirely different methods of client engagement. Further information on what I am sure will be interesting proposals for at least some advisers will be provided Over the coming months.
In the meantime, there is already ample evidence to differentiate the L&G approach to the RDR significantly from many other packaged product providers. It seems to have recognised there is a need for a symbiosis between both platforms and packaged product providers.
For all the predictions of its impending demise, the reality is that the life and pensions manufacturer community is not going to suddenly vanish and its products will continue to have significant value to many consumers, perhaps particularly those with more modest means.
However, life and pension companies probably do need to learn to evolve and play a different role, future-proofing their products so they can be held both independently and on platforms seems to make a great deal of sense. L&G must be applauded for its foresight and it will be interesting to see who else follows its lead.
Ian McKenna is director of the Finance & Technology Research Centre