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Platform edge: Bill Vasilieff

An article in Money Marketing last week stated that Standard Life is encouraging its salespeople to sell the benefits of FundsNetwork – the provider’s supermarket partner – in a bid to build sales of self-invested personal pensions.

We at Selestia have had two Sipp arrangements similar to this in operation for over two years and both have worked extremely well. Our thinking was that both parties to such arrangements – the Sipp administrator providing specialist administration and trustee services and Selestia foc- using on the investment solution – should stick to what they are good at.

The single point of contact through Selestia to the wider investment market brings a lot of efficiencies to the Sipp administrator, which can be reflected in the prices charged.

From our point of view, it saves us the cost and effort of building specialist and expensive skills. We are just following the principles set out by Adam Smith in his seminal work The Wealth of Nations, published in 1776.

Clearly, it is up to each organisation to decide who it partners with. However, the reported decision by Standard Life to levy what amounts to a 50 penalty against the other supermarkets and not to provide fund information if ass- ets are bought from another platform looks a bit odd and, according to the two IFAs quoted in the article, is likely to be self-defeating.

The Standard Life/FundsNetwork offering appears to be very expensive, especially for what is claimed to be an efficient service, and only time will tell whether or not the service can compensate adequately for the high cost.

Setting aside the issue of price, the question is whether joint ventures like this make business sense and if this represents the beginning of a trend in the market. We have already seen other tie-ups, for example, Legal & General’s arrangement with Cofunds although we do not yet know the exact shape of this arrangement.

The aggregation services offered by fund supermarkets are extremely costly to build and, judging by the number of market failures, high-risk ventures. At the same time, the market is going through a period of radical change as the old life insurance providers’ traditional offerings such as mortgage endowments and with-profits have become obsolete. The result has been that many of these providers have disappeared and those that still exist are left to ponder what their future offerings will be. To complete the picture, everyone is interested in new distribution possibilities.

Undoubtedly, there are opportunities to build partnerships where genuine synergies or distribution opportunities can be found from mutually advantageous alliances. This is nothing new in other industries. Take, for example, the motor car industry where one marque may be stuffed full of components from other manufacturers, even as far as major components like gearboxes and engines. On the face of it, it would seen like business madness to provide assistance to a competitor but the motor industry makes it work and I have no doubt that our industry will evolve similarly.

There will be difficult decisions to make along the way, particularly over future brand positioning in the market and the margins the different parties take, but the decisions will be taken and new business models will emerge. At the core of the decision-making process will be the effective use of technology, the costs of building the technology against the risks involved, brand positioning and distribution opportunities from the alliances.

Is this the beginning of a trend? I believe so and some of those involved in supermarkets already see themselves as the equivalent of Intel Inside.

The new multi-tied environment will accelerate this as everyone tries to secure their future in the new tied world.

Ultimately, as ever, the quality of the product will be the decisive factor in separating the winners and losers and the new alliance cannot afford to be complacent in thinking that a “tied” salesforce will be satiied with an inferior product – they will vote with their feet.

I think we are in for an interesting year or two as the changes sweeping our industry really bite.

Bill Vasilieff is marketing director of Selestia


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