The dawning of a mega-network of 7,250 registered IFAs and 3,700 firms
after Misys swooped to buy rival DBS for £75m has sent shockwaves
through the financial sector.
Despite the takeover – from which DBS chairman Ken Davy stands to net
£6.6m – DBS says it will retain its autonomy within the Misys group
and keep the existing management in place at its Huddersfield headquarters.
But DBS's Assureweb portal will be fully merged with Misys' m-link and
Misys says the potential for technological development is one of the key
motivations for the deal.
Other networks, IFA firms and product providers are now weighing up what
it means for one organisation to have a membership forming about 25 per
cent of the IFA market and how this will strengthen its bargaining power.
With Misys' main rival Bankhall, owned by software group Lynx, claiming to
have 22 per cent of the IFA market based on value, what concerns some in
the industry is that information technology companies now control almost 50
per cent of the market.
Rival IFA Tenet Group chief executive Simon Hudson says: “I think
providers may be concerned about the control of distribution going into the
hands of IT companies. If polarisation disappears, Misys could be doing
tight deals with a select number of providers and others will be ousted.”
National IFA Millfield chief executive Paul Tebbutt says: “The product
providers must be strong but Misys is clever and knows it cannot make the
providers do what they cannot afford.”
Some people are convinced Misys was motivated to buy DBS purely as a
distribution channel to gear up for what it sees at the inevitable ending
of polarisation. ProAct Legal partner Gareth Fatchett says: “It is clearly
a distribution-based deal in preparation for multi-ties.”
Chiefs at Misys and DBS will not rule out the possibility the deal could
lead to the creation of a significant multi-tie operation and both hint
they may offer members the option.
Misys insurance division chief executive Ivan Martin says: “Changing
polarisation is not a done deal but there is likely to be potential for
multiplechannels of distribution.”
Not surprisingly, product providers are unwilling to rock the boat and
commit to whether they think Misys will multi-tie.
One product provider representative, who did not want to be named, says:
“The market is in flux, including polarisation, and anyone who rules out
multi-ties is cutting off their nose to spite their face.”
Some people think smaller IFAs may be the ones to lose out as they will be
forced to join a network to have any chance to negotiate with providers.
National IFA RJ Temple head of communications Liz Walkington says: “It is
smaller IFAs who may feel added pressure to join a network. Misys could use
its bargaining power for good or bad. It will be good to have such a strong
IFA voice but not if it drives members in one direction. It may put more of
a squeeze on providers but it could have a positive influence on product
Smaller networks think the deal may be good for them as members will
dislike being a cog in a big machine.
Cardiff-based Interlink has around 200 RIs and its executive business
development manager Brian James says: “As far as medium-sized networks go,
it could be good news as members may not be happy with the increasing size
of their network and worry about risk of losing their own brand.”
Tebbutt says: “We have already been contacted by about four DBS members
interested in what we can offer.”
Another big hurdle for Misys to overcome is the issue of competition. Some
in the industry are questioning whether the deal may fall foul of the
Office of Fair Trading and Competition Commission.
Misys has made a submission to the OFT and is confident the deal will be
passed but the outcome may rest on how the OFT will define market share in
The OFT investigates any merger which gives the new organisation 25 per
cent or more market share. If it believes the deal will hinder competition,
it is referred to Trade and Industry Secretary Patricia Hewitt. She then
decides if it should be passed to the Competition Commission.
Misys says it has about 25 per cent of market share in terms of numbers of
IFAs but claims to have only 13 per cent of the value of the market based
on productivity and turnover. Davy says: “By the crudest measure of market
share – IFA numbers – we will have between about 25 and 27 per cent. In
terms of value – probably a more accurate measure – we will have about 16
per cent of the IFA market and about 10 per cent or less of the market as a
Davy argues one of the real benefits of the deal is how it will accelerate
the development of the electronic portal, which the OFT should see as good
for the market and consumers.
A competition lawyer with a leading City law firm says: “Market share is
one of the key tests used by the OFT and, if it thinks a company will have
a huge market share which may have an adverse effect on the consumer, it
may refer it to the Competition Commission. It normally measures market
share by value and volume in that order.”
The last word should go to the people who will be affected most by the
deal – DBS members. Halton Insurance Service director Mike Fry says: “From
my past experience, Misys is not good and I do not personally trust the DBS
board who will make a packet from the deal. It will be interesting to see
who stays on the board. They may find a few disillusioned members go
Now Misys has grown from super-network to mega-network, only time will
tell whether product providers, IFAs and clients will win or lose from the
organisation's ever increasing power.