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Outward bound

Money Marketing editor John Lappin finds that Aegon chief executive Otto Thoresen believes life offices ans IFAs working together can be the saving grace of country

Aegon chief executive Otto Thoresen believes that he is part of a new generation of industry leaders who can build a relationship with regulators and politicians to help increase savings.

He says: “If you look at the big long-term savings players, you have had change of leadership at Prudential, Legal & General and there will be a different Standard Life in a few years. There is new blood. That will change the engagement with regulators because the new chief executives were not part of past confrontations. They are part of the future.”

Thoresen believes that companies such as Aegon can become more outward looking, partly because the pressures of a sustained bear market have lifted while the regulatory environment is also improving.

“For three or four years, because of the difficult market environment and stockmarkets being so uncertain and with regulatory issues and stakeholder pricing coming in, everyone had become very focused on financials and lost the place of why we do what we do,” he says.

He is now setting about making sure the message gets across to the staff that “if we do our jobs well, then customers are going to have happier futures and a better quality of retirement”.

Just eight months into the job, the former Aegon finance director is fresh from a round of meetings with IFAs and clients which included pitches to pros- pective corporate clients.

He was initially nervous about attending pitches and was concerned that prospective clients might see it as a sign of desperation.

But he says: “I told them, I am here to tell you about our group and background but I am also here as chief executive, to get some frontline experience and find out what you, as a customer, are looking for. The minute you put that on the table you get 100 per cent positive reaction. There is nothing like it for broadening your understanding.”

Talking to IFAs, he says he found he could “generate goodwill by being positive about the industry and the future”.

He found that many intermediary businesses are adapting to a changed environment, particularly on commission.

His visits also found him challenged by IFAs to define what a life office is for. He says he acknowledged that the traditional life office role may be under threat but adds: “I do not question the role of a provider of long-term savings and protec- tion services.”

Thoresen believes IFAs are tending to look at a provider’s expertise in a particular area, say, in corporate pensions, rather than looking for waterfront providers that do everything, although Aegon has moved into onshore bonds and group risk recently, so it is expanding its specialisms.

Another specialism is distribution, with Aegon owning IFAs Positive Solutions and Origen.What did other IFAs think of this?

He says: “This was my first chance to ask other IFAs how comfortable or uncomfortable they were as a supporting IFA of Scottish Equitable, with the Aegon Group in the UK owning IFAs which could be their competition?”

Thoresen faced questions about Chinese walls and found himself reassuring some advisers who asked if they told Aegon their best ideas they would find them resurfacing at Origen a few weeks later.

But on the positive side, he could also say that Aegon now has a better understanding of the pressures that intermediaries are under, particularly on the regulatory side because it owns IFAs.

Thoresen rejects any idea of “Aegonisation” of the distribution firms, particularly with the two chief executives, Positive Solutions’ David Harrison and Origen’s Gareth Marr being two of the industry’s biggest person-alities. He says: “The thing about Positive Solutions is the single-minded focus on what it does and doing it very well. We have a ready-made bunch of people and David Harrison shows no signs of losing interest. He sees us as a financial backer. I think it is on a very strong growth curve.”

Thoresen believes Origen has done well to keep staff from the merger of five firms but that Gareth Marr’s challenge is to gel the business together.

He says: “What Gareth Marr now has to do is take it on to its next step – to play to the strengths that we recognised through the Resolution Life business.

“We are not going to lose that combination of entrepreneurial spirit plus customer focus and independence. Aegon will strengthen the infrastructure – it is not going to change the direction of the businesses. We have a distinctive management expertise we have acquired. The last thing that you want to do is rub away the edges of that.”

There are two strands to his thinking on competing in this market, particularly with so many factors at play which could radically change distribution. The first is “today forward” – an incremental approach that plays to the strengths of the company, while spotting any competitive challenges where the company needs to take defensive action. Part of this will be understanding the segmentation of distribution.

A typical decision would be whether or not to participate in a particular adviser’s multi-tie for protection. “The today-forward approach is about incrementalism. You do not have to scratch your head too much. You look at the sense of it commercially and you will go ahead or back away from it but it is not going to make a life or death difference to your business. But these little decisions keep coming up,” he says.

The second strand is to understand the big picture. “Working from the future back, you need to forget all the noise around you about multi-ties or depolarisation, waterfront or niche. You have to work on the fundamentals driving the UK savings sector.” These include the move from defined-benefit pensions to defined contribution for corporate Britain – the providers that can offer a full menu of solutions are most likely to win.

The second major change is demographics which sees people working for longer and maybe not retiring at the peak of their careers but some years later after part- time or freelance work.

He divides the market into the high-net-worth who can live off their assets, who may or may not spend their time in work, and who want to maximise the tax advantages, and the retirement solutions segment – those who need to save to secure their retirements.

He believes savings firms can play a part in helping all segments, adding that while many politicians and regula-tors do not expect the industry to help the less well-off “that does not mean that we do not have permission to go there”.

He notes that at a Washington conference on pension and demographics, he detected a note of fatalism. Faced with controversial decisions such as compulsion or extending retirement ages and the failure to get swathes of the population to save enough, some suggested that increased pensioner poverty was inevitable.

But Thoresen rejects this. “You cannot allow that – to sit there and say that generations are going to live in poverty. Part of the answer is people saving more, if people take responsibility for their long-term future and respond to that, the industry has to respond too, with more communication and clarity in the products and services that we offer. The industry has to step up to that challenge.”

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