All change. Yet again, the industry is changing, and perhaps it always
has. However, today the pace of change seems even more rapid than it was
when I first set out all those years ago.
The change I refer to this time around is related to share of distribution
and further consolidation of the financial services market.
For insurance companies, maintaining and increasing distribution is vital.
It is a question of survival and it is a pretty cut-throat business at the
moment. Securing distribution can mean purchasing shares in or portions of
IFA businesses as well as diversification into areas not tackled so far.
The frenzy with which this is happening reminds me of the purchase by
insurance companies of estate agents in the late 1980s. Hopefully, the
end-game will not be so unrewarding.
As far as IFA businesses are concerned, again, further consolidation is
taking place. There are lots of discussions about mergers and
acquisitions, creating brands and providing the right advice to the right
people at the right price.
All this makes for very interesting negotiations. Undoubtedly, the effect
on the industry will be far reaching in the long term. With a smaller
number of bigger players, the shape of the industry changes and so will the
relationships between product providers and IFAs. Stronger allegiances will
be formed and some IFAs will be frozen out.
Within the 1 per cent world, for example, stakeholder, large amounts of
commission proportionate to the charges are being paid. This type of
arr-angement is only sustainable in the short term.
Product providers are going to have to think very carefully who their
friends are, who the rising stars are and who they want to support. For
those IFAs left out in the cold, the future does not look bright at all.
However, IFAs are sup-remely adaptable. It is much harder to make profits
out of pension business these days and many IFAs are turning towards
investment to survive. Protection also offers a profitable form of
business, particularly as some protection contracts are not regulated,
which will lead to some companies seeking to reduce their regulatory burden
by focusing particularly on protection.
So, why has all this happened? Well, undoubtedly, stakeholder and charge
caps have had an impact. What also seems certain is that there is going to
be some form of depolarisation. This opens up the marketplace and further
threatens IFAs. With the advent of some form of multi-tie, the permutations
and combinations of businesses in the future will undoubtedly open up.
I wonder if the people who first thought about these changes ever really
thought through the impact on the industry or, most important, on the
Independent financial adv-ice will become the privilege of the rich and
there will be a further fallout of those people that IFAs cannot afford to
look after. These people will go to some form of multi-tie company or to
Was this the Government's intention, I wonder? If not, will it perhaps
listen the next time around before it creates the next change that will
have such a big impact on us?
We have so little control of this but have to live with the consequences
of its decisions Maybe next time the Government will consider the consumer
Amanda Davidson is a director of Holden Meehan