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IFAs feel the sway towards multi-ties

While the future of polarisation is still under consultation, it is clear from the findings of Money Marketing&#39s research that IFAs are taking possible changes to the regime very seriously.

The research was carried out by financial services consultancy Sway to investigate IFA attitudes to polarisation and multi-ties.

Sway sent out questionnaires to RIs asking them to comment on a range of multi-tied arrangements. It got 804 replies.

Sixty-four per cent of these were principals of firms and 36 per cent were RIs. The respondents ranged from a firm of 200 RIs with a turnover of £20m to a single RI with a turnover of £30,000.

Almost 20 per cent of IFAs say they would fully multi-tie. Thirty-four per cent say they would consider some form of multi-tie such as splitting their business to retain an independent operation. Around a fifth of the IFAs are willing to give up their independent status.

However, some in the ind-ustry are still hesitant about drawing too much from the findings, saying multi-ties are still only hypothetical.

Aifa director general Paul Smee says: “I think one question still needs to be addressed – just what is a multi-tie? Anything on this subject needs to be treated with a little caution until we know what exactly and on what terms a multi-tie is.”

But Sway chief executive John Maguire says the findings cannot be underestimated. He is certain that multi-ties are on the way and says this can no longer be thought of as a marginal issue.

He says: “For the providers which came out as most popular for multi-ties, such as Norwich Union, this has major positive implications for EPI expectations as they will have access to IFA sales plus multi-tied revenue.

“We will see some insurers marginalised out of the market, with those already geared up for multi-ties making hay while others will struggle to re-engineer themselves. If a third of the market moves towards multi-ties, we will see dynamic change in who dominates the industry.”

NU, Standard Life, Legal & General and Skandia are the four top providers that IFAs would most prefer to multi-tie with. IFAs are not surprised by the top four, believing these are the types of providers which would still offer a multitied business a good spread of strong products.

Informed Choice managing director Nick Bamford says: “Norwich Union and Standard Life would be on my list if I were to multi-tie part of my business but it depends on how many you are allowed to choose. If you are limited to five or six ties, you need key pension and investment pro-viders and Standard and NU fall neatly into that category. They are also conveniently competitive in annuities.

“Then you would be looking at a protection provider, such as L&G, who tries to be all things to all people. And Skandia makes a lot of sense. If you only have five providers, why not make one that has a huge range of external fund managers which you can offer access to?”

Eighty per cent of IFAs, however, are still committed to total independence. Protection IFAs are most likely to multi-tie, with 46 per cent saying they would make the transition while 87 per cent of investment IFAs and 66 per cent of pension specialists say they would remain independent.

Smee says: “It is interesting to see how many IFAs prefer to stay independent and shows a great commitment to the type of service independent advice provides.”

Providers, too, despite their enthusiasm for winning in the multi-tie race, are not rushing to throw their whole lot in with early plans for multitied arrangements.

Standard Life national dev-elopment director for IFA network sales Don Wild says: “There is a concern that people are rushing to conclusions about the outcome of the current review on distribution. The evidence shows an inc-reasing market share for IFAs which indicates consumers understand the value of independent advice.”

Skandia group marketing director Bill West agrees. He says: “It is encouraging that 80 per cent have confidence in the market for independent advice. The basic principle of the IFA relationship is that they act as an agent for their client. With multi-ties, the adviser becomes the agent of the provider.”

Some IFAs are warning advisers not to get carried away by thoughts of provider deals, saying it is still too early to finalise a decision and just being an independent adviser is not enough to guarantee floods of offers.

Syndaxi Financial Planning principal Robert Reid says: “Multi-ties are not going to do anything other than guaranteed a level of distribution. Providers will not be buying IFAs as an investment. A lot of IFA firms may well want to multi-tie but there will not necessarily be the same rush from providers. I do not think it is automatic that all IFAs will be attractive to providers.”

While parts of the industry appear to be already preparing for multi-tied arrangements, the merits of the system have yet to be tested on consumers. Swiss Re&#39s insurance report, published last week, shows a cool consumer reception to the concept.

The report states: “Multi-ties were seen by consumers as a glorified tied arrange ment which would involve some back-scratching. There would be confusion over brand responsibilities and the market would still be commission-driven.”

Despite the apparent willingness of some IFAs to eng-age in multi-tie relationships, such a move might be a far cry from the independence that consumers seem to be looking for.

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