Even before the news broke about a black hole, why on earth would AMP want to buy Towry Law (allegedly!)? As I understand the rules on polarisation, AMP's ownership of Towry Law would effectively ban TL from selling NPI or Henderson products other than stakeholder pensions.
Maybe AMP would be placing a bet on the outcome of the polarisation review? Buy Towry Law as an IFA now, turn it into a multi-tied business once polarisation is done away with and then sell lots of lovely AMP products.
We know already that some US product providers in the US own networks of quasi-independent advisers and shovel lots of their own products through the channel. Rumour has it that a couple of years ago, a major US product provider went around the entire UK IFA market looking for something to buy pretty much on the same premise.
We all know, too, that a few product providers have been very vocal in their efforts to erode polarisation. Zurich's highly effective lobbying mach-ine can take a great deal of the credit for the erosion that has already taken place. Others who are currently heavily dependent on IFAs for their business have been suspiciously low-profile and much less vocal in favour of the retention of polarisation.
What's going on? It's control, stupid! With IFAs running 60 per cent or so of the market and getting bigger, product providers feel increasingly insecure.
Many of them desperately want to control their distribution rather than be exposed to the fierce competition of the IFA market. Hence Zurich's open drive for depolarisation and the pusillanimous mutterings of others who should know better.
What prompted me to write about all this was the shock, horror headline on the front page of Money Marketing last week, IFAs set to take on providers, the idea being that IFAs will start to develop their own products.
My friend Andy Bedford was quoted in the article saying, more or less, why would IFAs bother? I am quite sure Andy knows why they would bother.
Imagine a world in which a major IFA or network responds to the weakening of polarisation by introducing a multi-tied dimension to its business alongside its independent arm. Imagine, too, how profitable it could be to develop their own products to distribute through their multi-tied business. They could cherrypick the most profitable products, use the latest technology to provide administration – no accursed legacy systems – and harness their own internet portals to feed directly into those systems. And no expensive broker consultants or IFA marketing would be required… sounds too juicy a prospect to miss, doesn't it?
Some product providers are quietly hoping that multi-ties will be allowed because they believe it gives them the opportunity to exert greater control. Of course, they had 100 per cent control of their direct salesforces and look where that got them.
Changing the rules always has unintended outcomes. With Misys, DBS and Bankhall responsible for around 40 per cent of IFAs on their own, Bradford & Bingley and Woolwich responsible for another large chunk, I predict the erosion of polarisation would readily lead to major players in the current IFA market deciding to move up the value chain.
Existing product providers could then add shrinking market shares to shrinking margins to keep them awake at night.
Once the genie is out of the bottle, it is unlikely to be put back. Do not let it happen.