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Life offices&#39 dilemma as clock ticks

The FSA&#39s decision to abolish polarisation has left life off-ices in a strategic quandary over whether to back the IFA sector or enter into multi-tie agreements.

With the regulator entering into a period of consultation, many observers believe it is unlikely to alter the main thrust of the proposals. Life offices realise they have to act quickly or risk being left with severely limited distribution.

Industry experts say it is the biggest providers chasing mass-market business which are most likely to seek multi-ties, possibly negotiating deals as a block to avoid becoming embroiled in costly bidding wars with each other.

Some may also invest in higher-profile IFAs to allow them to continue to exert influence in the independent sector.

But, as observers point out, these IFAs are likely to be fee-based already. It is the commission-based firms which are under pressure to multi-tie.

Most life offices are reluctant to state their intentions at this stage but Skandia, which acquired Bankhall last month, has admitted it is prepared to have “detailed discussions” with IFAs which express an interest in multi-tying.

For the smaller life offices, experts claim the depolarised market will present an even harder test as they lack the financial clout to compete with the top players in investing in the major IFAs which could be potentially available for acquisition.

Many may even struggle to secure a slot on multi-tie panels, with distributor firms to prefer dealing with a handful of providers with the best-known consumer brands.

The experts claim many of these types of life office will be left with only a small number of key IFA relationships to rely on.

Cazalet Financial Consulting principal Ned Cazalet says: “Life offices have to make the right decision against the clock.

“Any of them not in the Manchester United league are likely to struggle, the losers will not feature on anybody&#39s list.”

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