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Listing pressure sees IFAs seek providers’ cash

Friends Provident managing director of UK sales and marketing Simon Clamp says the burden of being stockmarket-listed has been one of the drivers behind IFA firms seeking investment from providers.

Friends owns Sesame and Pantheon and has several minority stakes in networks such as Intrinsic.

Clamp predicts that provider ownership of IFAs will continue, with firms opting for controlling stakes rather than minority shares now the FSA’s better than best rules no longer restrict providers to stakes of under 10 per cent in IFA businesses.

The retail distribution review interim report suggested the regulator could look again at provider ownership of distributors. But Clamp believes the regulator has now learnt how to put appropriate governance systems in place to allow firms to operate properly without inappropriate intervention from shareholders.

He says: “There is a cost to being quoted and you need to look after your investors. A lot of smaller Aim companies find themselves in a position where it is quite difficult to shift the share price and, often with these companies, significant holdings are owned by individuals within the firms so you have an illiquid quoted stock.

“You can sometimes find Aim-listed companies that deliver profits above expectation, growth above expectation and have reserves in the bank but the share price does not move as it is not driven by the underlying value of the business but by a sentiment elsewhere about the sector they are in.”

Clamp says Friends continues to look at the variable annuity market but there are no immediate plans to launch a product. He says the sector has been slow to take off in the UK, partly as a result of the cost of guarantees.

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