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Inside edge: Peter Hales

Norwich Union&#39s strategy is a simple one. We are totally committed to the IFA sector but we recognise that it is generally undercapitalised and undergoing significant change.

We firmly believe that by making selective investments in IFAs, we can help the independent sector prosper.

More specifically, the investments which we have made over the last year have been aimed to stimulate growth of the IFA sector, fund development of distribution and, importantly in today&#39s 1 per cent world, drive forward the use of e-commerce trading between IFAs and product providers.

The strategy is not simply altruistic, the investments need to create shareholder value for Norwich Union as well and we have built processes and capability with the aim of meeting both objectives.

It is becoming increasingly clear that other product providers and distributors share many similar visions and goals in their businesses – growing their markets, developing innovative technological solutions, widening their customer base, improving customer service and growing profitability to name but a few.

It therefore makes even more sense than ever before that product providers and distributors work more closely together to ensure that they achieve these common goals. Growing the market is as important as growing market share.

The current CP121 proposals to abolish the better than best rules, which currently restrict product providers from taking more than a 10 per cent equity stake in IFAs, are to be welcomed.

This barrier to investment has to be removed to ensure there is a level playing field for all concerned.

The current position, whereby a product provider can buy an IFA company in its entirety and sit out the better than best rules until they are relaxed, could, if the rules are not removed quickly, severely distort the market.

What other industry is there where a provider can not invest in developing its distribution because of artificial constraints?

We believe that investments in IFAs by product providers should be fully transparent. Who owns a company or who can influence distribution policy through an investment should be clearly explained to IFA customers at the point of sale. Getting the right level of transparency will be vital to ensure consumer confidence.

To date, Norwich Union has invested around £38m in a number of key IFA partners, including Tenet Group, Inter-Alliance, Berkeley Berry Birch, Cavanagh Financial Services and IFG. These investments are in addition to our £11m investment in the Misys Assureweb portal.

One thing we are not seeking to do with our investments is to control or influence IFAs whatsoever.

Our strategy is not to buy up distribution – nor are we interested in taking controlling stakes in IFAs.

The investments we have made to date are at arm&#39s-length investments. We clearly see IFAs as the specialists in the advice process and local distribution.

Product providers, on the other hand, have the expertise of product development and getting the products to market and we do not see this changing in the future.

Investment is no substitute for providers continuing to offer top-quality products, propositions and support to IFAs.

IFAs must be allowed to retain the control, ownership and direction of their businesses and their entrepreneurial flair, which has made them so successful in the past, should be allowed to flourish in the future.

We believe that investments made by product providers should be structured on an arm&#39s length but supportive basis and that independent advisers should be left to concentrate on what they do best – advising the consumer on their financial wellbeing and developing their businesses with our support.

Peter Hales is sales and marketing director at Norwich Union

A host of industry experts will examine the essentials of investing in hedge funds at a two-day conference in London next month.

Hedge 2002 is an educational forum designed to provide investors with the essential information they need to consider when investing in hedge fund investments.

Topics covered will include the law and regulation of hedge funds, fund manager selection and hedge fund performance and outlook. Speakers will also look at who are the current investors in hedge funds and new products entering the marketplace.

Speakers will include Goldman Sachs Asset Management executive director David Burnside, Bear Stearns International managing director Thomas Colucci and New Star Asset Management director Ravi Anand.

The event takes place at the Inter-Continental Hotel, London on July 2-3. Contact 01202 201181.

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