The complexity of negotiations shaping the new multi-tie landscape has been brought into focus by Norwich Union's move to offer only protection products to Sesame but its whole product range to Bankhall.
After NU chief executive Gary Withers revealed the company's two-pronged deal in last week's Money Marketing, NU head of media relations James Evans says negotiations are far from over. “What we announced was what we have signed and agreed on up to this point. That is not the end of it. We have a broad strategy, a broad product range and we want a large distribution footprint. We would not preclude anything,” he says.
Sesame commercial director Martin Davis is also adamant that discussions are still being pursued on its selection of panel members.
Some industry watchers believe the complexity of the multi-tie market is making providers tread carefully before signing bigger deals. Having to meet the cost of marketing support for the privilege of entering a multi-tie relationship – on top of commission payments – makes the sums tricky.
If the figures do not add up for NU, there could be a long delay before a satisfying agreement is reached.
Negotiations become even less simple in product areas other than protection.
Tenet chairman Barry Kayes says as yet there seems to be little benefit in multi-tying for anything other than commodity-type products. His company – which has been in contact with providers about a deal – believes a multi-tie decision should not be made until it is clear what the final rules will demand from March 2005.
Kayes says: “Once you move away from protection, the benefits seem a long way off, especially with wraps and investment capabilities as they are highly competitive areas and there is not a lot of margin to be shared out. To improve on that is a challenge.”
Liverpool Victoria director of intermediary distribution Rye Mills says: “Multi-tying is predominantly driven by protection products. The time is yet to come for investment products due to the demands put on the business model of the network.”
This may mean that more providers will adopt a similar model to NU with protection-only distribution agreements.
Scottish Widows intermediary and partnership director Robert Wyllie suggests providers could be dividing into three camps – those which follow NU's lead, those which make serious financial considerations before choosing which networks to multi-tie to, resulting in fewer agreements, and those which decide not to take the multi-tie route.
Wyllie says Widows has been engaging in a range of discussions with networks but will be unlikely to engage in similar relationships to NU. He says: “We want to assess whether it is financially attractive or if it is a business model that will add value in the long run.”
He says providers should think carefully about whether they want relationships with every multi-tie operation in the market. “Any organisation, no matter how big, would have a finite capacity to work on multi-tie implementations,” he says.
Meanwhile, Withers says NU is still in the process of negotiating further deals. On July 15, Portman Building Society announced a multi-tie model with NU acting as key supplier from January 1. Following the merger with Staffordshire Building Society, Portman is also in negotiations with Axa, with an announcement expected later in the year.
Portman group chief executive Robert Sharpe says the industry should expect a lot more announcements.
For some members of the Sesame group thinking of taking the multi-tie route next year, the idea of not having access to the whole NU range is offputting.
Belgravia Insurance consultant Paul White says this runs counter to being part of a network and, the sooner clarification can be given on the relationship with Sesame and the rest of NU's range, the better.
It is still far from clear how many IFA firms will choose to take the multi-tie route after all. A Money Marketing/The One Account poll in May found that 81 per cent of IFAs would not choose to multi-tie.
Mills says he is not surprised by these figures and the jury is still out as to which way individual IFA firms will go when it comes to multi-tying. A number of non-regulatory networks will persuade members to multi-tie but firms will not be keen to give up their independence. He says: “We have been in a number of active negotiations on broader-based panels. The question we have to look at is how many will want to move away from whole of market?” Moodybrook Financial Services principal Lawrence Hayward says: “Is Joe Public really interested in this? I think not. What Joe Public wants is good advice, be it from the high street or independent advisers they can trust. The public just needs to be made aware of the choices out there.”