View more on these topics

Outside edge

Behind the headlines of the recent CP121 from the FSA, there is much

to consider. Although most of the initial debate centred on the depth

of life office pockets and the likely rush to buy/secure distribution

(delete according to your view), there is a whole raft of other

issues that require consideration.

I am particularly interested in the impact of the proposals on the

fund management sector – especially on those middle-ranking companies

which are unlikely to have the cash or desire to get involved in a

bidding war for distribution.

Consider the scenario that the major life offices have a major panic

and recognise that their current business model is based around a

very weak distribution system. I doubt if it is news to point out

that hundreds of broker consultants traipsing around the country

flogging with-profits bonds through mediocre IFAs is not a

sustainable basis for a business.

However, that is not to say that the status quo may not continue.

After all, it seems that on a multi-tie basis, providers may be able

to pay quite exorbitant levels of commission in addition to

feathering the nests of their “salesforce”.

In such a scenario, the shrinkage of the IFA market may be at the

upper end of expectations and we could see as many as 90 per cent

going to the wall or seeking the sanctuary of a multi-tie. Where

would this leave the distribution opportunities for the asset

management groups? Consider first of all the mainstream,

middle-of-the-road asset managers with no great areas of speciality.

As today, they would be left with three possible lines, namely

direct, IFA or multi tied.

The obvious worry is that mainstream asset managers would be largely

excluded from the multi-tied sector as they have no access to soft

policyholder capital. This is a very key point as the direct

competitors of this part of the fund management market – the life

offices offering with-profits and managed funds – have access to

rather large sums of said cash for which no one is really accountable

should things go wrong.

Consider the early experience of stakeholder if further evidence is required.

In an IFA market, in which 90 per cent of individuals have morphed

into multi-tied authorised financial advisers, I would expect asset

management groups to experience a slump in business of at least 40

per cent.

The outlook for niche and very big fund groups is likely to be

considerably more app-ealing – the niche players will be sought as

multi-ties and will continue to remain attractive to the IFA sector

while the very big groups will get by on the basis of their brand


Should all this hypothesising emerge as reality, what will be the

impact on consumers in terms of their choice and likely returns? It

is here I fear the worst. The last thing inv-estors need is a

mass-market investment industry dominated by insurers in which the

returns are delivered via the rickshaw of with-profits or the

questionable talents of life office investment divisions.

Furthermore, in a multi-tied environment, investor choice may be

artificially restricted to generate the greatest margin for the

product providers. One imagines that a narrowing of consumer

flexibility was not a major driver behind CP121.

No one knows for sure who will be the winners and losers although I

cannot help thinking the balance of power is swinging further away

from providers. Maybe this will be the first wake-up call that is not

greeted with the usual slap of the snooze button.

David Ferguson is a director of product design and marketing

consultancy, the abacus


The Plotz thickens for investors in UK films

Curzon Capital is to sponsor Movision Management&#39s first series offilm partnerships intended to offer tax relief for investments inBritish film and TV productions.The partnerships have been structured to benefit from capitalallowances for film and television finance. These allow investors tofinance the investment from existing tax liabilities or tax alreadypaid. Investors also receive a small tax […]

Julian Gibbs

Despite volatile world stockmarkets, stockmarket-linked high-incomeproducts have proved very popular with both the public and IFAs.Future Value Consultants, an independent analyst rating theseproducts, asked IFAs to vote on the products they like best.The winner was the NDF Abbey National extra income and growth series,which gave investors an income of 10 per cent or more with […]

A consumer&#39s view

The outcry following the FSA&#39s proposal to scrap polarisation is notgoing to go away and quite right, too. It is hard to see how such amove could benefit consumers in the long term.The proposed changes to allow multi-ties and compel IFAs who want toretain true independence to charge fees owe less to any concern forconsumers […]

ABN fears bulk annuity burden at Pru and L&G

Investment analysts ABN Amro have expressed serious concerns overPrudential&#39s and Legal & General&#39s bulk annuity business,claiming that the liabilities taken on may be too great.Bulk annuities are created when defined-benefit schemes close andtrustees sell off future liabilities to insurance companies.ABN has recommended reducing shareholdings in Prudential afterlooking at its bulk annuity business.A report from the […]


Guide: reporting to the Pensions Regulator — what and when?

Johnson Fleming has published a step-by-step guide demonstrating the importance of record keeping and reporting, and how it can ensure you operate a successful scheme. The guide takes you through some key questions you need to ask and identifies the information you need to obtain. The topics include: why you need to keep records and the benefits of doing this; registering your scheme; what information you need to record to ensure you meet the Pensions Regulator’s requirements; and what items need to be recorded and when.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    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