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Independent View

It has taken a long time but at last IFAs are being recognised for their true worth. I do not mean our value to society although I am sure we do help millions of people.

What I am talking about is the clear recognition that an IFA is an extremely val-uable commodity to a distributor of products.

Why else would technology company Misys be hoover-ing up networks for tens of millions or Lynx paying more than £100m to a financial services support company?

The reason in these two instances is technology-driven. Control the distribution and you control the people that make the products.

After all, they are the ones with the subsidised value. Why spend billions trying to buy the product provider when you can squeeze them more effectively by cutting off their distribution?

Not only do technology companies now own more than 30 per cent of the IFA community but they also have access to millions of top-quality clients.

These are clients with whom IFAs have spent the last 20 years establishing a relationship and in reality are by far the most valuable part of their business.

I believe the product providers have missed a huge opportunity by allowing this to happen and by not competing on price for the networks.

This has given the technology companies the opportunity to get into the market for next to nothing. In addition, with all their resources, why haven&#39t providers been more acquisitive in the technology sector instead of allowing companies in an unrelated area to control the future of their market share? Equally, you have to ask why IFAs have allowed themselves to be “sold” in this way. Not surprisingly, the response will be: “I&#39ll wait to see what happens.”

This is hardly a shock. When we aren&#39t seeing cli-ents, carrying out admin, running the office, studying for exams or answering compliance queries, it is extremely difficult to find the time to change networks.

With the big IFA firms,we have seen a different pattern emerge. Two firms that come to mind are Sedgwick and John Charcol, both now owned partly or wholly by building societies.

Here, the strategy is different in as much as these acquisitions can add value to both the purchaser and the purchased. Both understand each other&#39s markets as they are used to dealing with clients, developing products and services, and have recognisable brand awareness in the financial services market.

This surely must be a better fit because if a technology solution is required they can buy it in when the dust has settled. I have always been a firm believer in sticking to what you know and what you are good at. Only time will tell whether technology companies will come out ahead of societies or who will end up owning whom.

So, how much longer are the providers going to sit on the sideline and watch their distribution get gobbled up?

The very fact that we have always been a fragmented sector has worked to their advantage. This is fast becoming no longer the case and they ignore this new wave of acquisitions at their peril. Or do they have another trick or two up their sleeves? I for one would be surprised if they haven&#39t.

Steve Kelland is chairman and chief executive of Burns-Anderson

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