View more on these topics

Multi-tie edge

Park Row has been mentioned as perhaps providing a new yardstick by which to measure a multi-tie. This may sound like we are jumping the gun – we will not see the first official multi-ties until early 2005.

However, we don&#39t think multi-ties are a one size fits all solution. Having spent six mon-ths trying to make them fit, we have decided that the way the multi-tie market is developing, it is impossible. I am not, though, saying that multi-ties are fundamentally flawed.

Where, as the regulator intended, multi-ties are introduced to increase consumer choice (such as for tied and direct salesforces), interesting models are being developed. Consumers should eventually benefit from these options – accessibility and choice, heavy motivators for the FSA and the Government.

We have an issue with the introduction of multi-ties in the independent sector. You have to consider the immediate impact – customer choice is compromised.

There are other alleged benefits from moving from IFA to multi-tie – lower costs, greater support, integrated technology and so higher margins for sharing remuneration within a relationship. But such relationships do not yet exist. In the short-term, such positives will not materialise.

In the longer-term, commission pressures (we believe non-multi-tie providers will resist the commercial forces dictating that commission rates must fall – until the market settles down) and service levels (withdrawal of face to face over time for smaller, directly regulated businesses), mean there will be a slow rise of recognition from some that multi-tie may be a more comfortable home.

We looked at offering IFAs multi-tie offerings for their pensions and investment business. We also looked at mortgage and protection separately.

In the commoditised products markets – mortgages and protection – which already work on a higher technology level and usually have simpler product and sales processes, we will all realise the benefits of working closer with some providers. We will be running wide panels for mortgages and protection and protecting our advisers&#39 independence. These panels are being built around research. We have five building blocks:

•Improving our current proposition for clients and advisers.

•Increased and wide choice of products.

•Consistent processes for all business.

•Adoption of full technology and e-submission (where available).

•Ensuring high levels of service and support.

In return for mandating electronic business and offering controlled distribution, along with a comprehensive MI package and commitment to developing those relationships, we can justifiably secure top market rates. We are not just squeezing for more commission or higher fees in isolation. This will enable us to offset higher regulatory costs while our advisers&#39 income increases to reflect their input.

In the short term, we cannot see any positive advantages for consumers, advisers, distributors or providers in committing to a multi-tie model for pensions and investment business.

IFAs have aspirations to remain independent and having invested time and resource considering otherwise we have restated our absolute commitment to independence. It is what our clients want and what our advisers want to provide.

So, why are so many distributors and providers rushing to the brink of multi-tie? First, there is no regulatory requirement to base a multi-tie model around “best of” or research. Second, margins are falling, mainly due to regulatory restrictions. There is less money to be made and commission rates are under pressure.

There are two major influences on the shape of IFA multi-tie:

•Providers – there is a land grab for distribution. With commission rates falling, there is a need to be able to do more with distributors and have a guaranteed route to market.

•Distributors – non-profitable business models and increasing financial squeeze on cash-flow and/or share prices means multi-ties were being used as a solution for cash injections and keeping ailing businesses afloat.

Fortunately, we can take the high ground – in Royal Liver, we have a financially secure and strategically supportive parent. This has made our step aside that much easier. Royal Liver believes in distribution and is looking to build on this as a key part of its strategy to focus on the delivery of sound advice and competitive financial services products.

The recent letter from the FSA to chief executives of providers and IFA firms was sent to pull the plug on those with funding aspirations shaping their thinking. Time will tell how effective this is.

Will we stay out of the multi-tie market for good? No, we will continue to watch developments. If we see models offering value all round and this creates interest from our advisers, we will come knocking. However, give it 12-18 months.

The panacea for us and our clients is clear multi-tie models being built around genuine support and integrated technology. That will take time, money and a spirit of co-operation and openness not yet experienced between those involved in the development, administration, delivery, sales and maintenance of financial services products.

Jo Smith is head of business development at Park Row

Recommended

Extinction claim at odds with reality

Contrary to Peter McGahan&#39s assertions in Money Marketing that supermarkets are exp-ensive and double charge, true fund supermarket platforms have been successful in the UK precisely because they do not layer double-charging on underlying funds. A further factor that has ensured that fund super-markets have enjoyed a rate of adoption by IFAs quite unprecedented in […]

Future for asset backed securities

Investors need to pay more attention to asset-backed securities, says Standard Life Investments.The market for asset-bascked securities has grwon phenomenally in recent years in the US and Europe, says head of treasury john Cummins.He believes that this is set to spread to Asia and will cause good opportunities for investment.In Europe ABS issuance has risen […]

Matrix techs a chance on VCF VCT

Matrix Money Management intends to raise up to £35m for the Foresight 2 VCT, a venture capital trust that aims for growth by investing in unquoted technology-based companies in the UK. The money raised by this offer will initially be invested in money market funds while suitable VCT investments are found. Around 80 per cent […]

Testing times for KFI systems

AMI director Chris Cummings“In September, the AMI challenged all lenders to publish their KFI test systems. Failing this, we said that they should have them ready by the start of October so that their customers (that is the intermediary market, in case anyone forgets), could test them out. It would seem odd, after all, that […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com