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Independent view

At the end of May, I got a copy of a very brief document prepared for the IMA by Deloitte and Touche.

The first table gave information which might just have been worth the vast cost that was probably involved in the document&#39s preparation. The table indicated the major strategic issues that the inv-estment groups and some life companies had identified.

It is not unreasonable to expect in bear markets that self-preservation comes to the fore. I was, therefore, not surprised to see that, since the previous survey, concerns about revenues moved from fourth place to first place.

Similarly, concerns about costs had moved up by four places from seventh to third and anxiety over sales volumes had rocketed from 16th place to fourth place.

On the other hand, investment performance had been relegated from first place to fifth place, a short-term decision which they might rue.

Similarly, five places up from 10th to fifth place were concerns of staff retention. Clearly, this must relate to admin and sales staff rather than certain groups&#39 total absorption, with either retaining some star fund manager or poaching a similar beast from a competitor.

I was relieved to see that reputation had been promoted five places and not surprised to notice that the groups were more prepossessed with market share. At least the sales director could point out to his MD that although sales were down by 50 per cent, their market share was holding up. I suspect he might retain his job.

I found all the above of only academic interest since the results were probably as expected. However, I took the greatest interest in second place in the table, not only the incumbent of second place but also what had occupied the slot in the previous year.

Two years ago (that survey related to the year 2000),e-commerce was captivating the groups but today e-commerce did not even merit a mention. I was rather surprised and marvelled at the short-termism that can result from a period of poor trading. I rather suspect if one or two of the 36 groups that had taken part in the survey could be brave enough to take a contrary view, they could really steal a march over their peers in the realms of e-commerce.

It was, however, the new incumbent at number two which I found most interesting and when I saw it I could not help but smile smugly. Yes, straight in at number two and never previously included in the table was distribution.

That should also bring a whole multitude of smiles to the broking community in the UK. In case you need further explanation, it means that finally our industry has bec-ome a mature one.

Finally, it is the distributors which are gaining the whip hand and it is because investment products have become virtually commoditised that all the other concerns of the groups follow.

Anxiety about margin, sales volumes and brand (reputation) have replaced the concerns of a bull market. It, therefore, seemed strange that one very cost-effective distribution channel, namely e-commerce, is being def-erred to the groups&#39 new interest and hunger for acquiring direct distribution by paying silly multiples for brokers.

They are even adding ins-ult to injury by allowing some fund supermarkets to distribute their product without promoting their brand values and thereby obliterating tot-ally and finally the very tenuous relationship they had with investors.

In any industry, there is a huge temptation to pursue short-term propositions. There are products which are created more out of fashion than sense. There are business decisions which can be made that might be beneficial in the short term but you can always tell who are the real long-term players and who will probably not shoot themselves in the foot for a short-term gain or a short-term saving.

I have been pleased to see that many of the major groups were prepared to take the pain of advertising through thick and thin, notably Fidelity, Jupiter and New Star (sorry if I missed you). In the broking fraternity, we must also “stick to our knitting” and continue to talk to our clients.

IFAs and the broker market in general are finally at the dawn of ruling the roost – the industry realises distribution is all. Long may it continue.

Peter Hargreaves is managing director of Hargreaves Landsdown Asset Management

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