But that was five years ago and since then, there have been some fundamental chan-ges in the way we conduct business with advisers -whether tied or independent. It is those changes that shifted Legal & General’s perceptions as to what depolarisation means in terms of conducting business with our partners.
When the OFT paper was published, all the excitement was around retailers – the banks and building societies – loosening their ties with their insurance manufacturer, with a view to giving consumers greater choice by teaming up with other partners.
Consumer reaction was not wholly favourable and commentators often saw the multi-tied approach as an inferior model to full independent financial advice.
But in the intervening years, while the industry waited for – and are still waiting for – the final rules on depolarisation, much has happened to influence the final outcome, so much so that it is no longer appropriate to think of depolarisation simply as banks and societies moving towards multi-tie.
For example, anyone reading Money Marketing over the past couple of years has read a great deal about IFA firms seeking to go down the multi-tie route – a scenario initially rejected by most IFAs. However, since that time, a number of firms have come forward and actively sought multi-tied arrangements. Similarly, a number of tied firms – including banks and societies – have been looking towards multi-tied arrangements.
However, the one model that has not had much of an airing came to the fore last week with Bradford & Bingley’s announcement that it was to tie to Legal & General.
This was a surprise to some – mainly those who had not considered a whole new element in the depolarisation debate – one which had not been thought through in 1999 when the concept was first mooted. The reason for that was that the rabbit being pulled out of the L&G hat did not really exist at that point.
So what has been happening that has helped L&G turn depolarisation on its head? Put simply, it is the technology.
With the drive by L&G to eliminate paper transactions from the sales and admin process – particularly among tied partners – the company has significantly reduced the cost of transacting business. In a low-cost, low-inflation environment, the challenge was to re-engineer processes to drive down costs, improve efficiency and avoiding outsourcing.
Let’s face it, depolarisation hit the protection market long ago with banks, societies and even IFAs adopting L&G’s single tie, online term insurance model, so avoiding the multi-tie option and providing a profitable consumer-friendly proposition.
The drive to lower cost and improved efficiency has enc-ouraged such a flight from paper in the protection market that firms hit hard by the down-turn in investment and pension business have thrived. With end to end processing for protection business, a good consumer proposition and a strong income flow, it was hardly surprising that the single tie concept has been highly valued.
Furthermore, the success of single-tie relationships has convinced some companies that the mutli-tied relationship could get in the way of a now thriving good business and some, at least, are opting to stick with what they have got.
However, as any IFA would suggest, the single tied relationship does not necessarily provide the degree of choice needed for discerning highnet-worth individuals when it comes to investment business. It was this factor that led L&G to introduce a fund supermarket into its stakeholder pension proposition – a feature which was applauded at the time.
However, to extend that principle and enable tied advisers to advise on the choice of non-L&G funds was not all-owed but would be overcome under the depolarised regime. Hence the announcement that L&G was developing an open architecture platform – one that would enable advisers to advise on a wide range of underlying funds within different product wrappers.
Looking forward, we have the concept of “single tie, multi choice”. This model means an L&G platform, a quality brand, quality products offered in a wrapper (stakeholder pension, bond or Isa) acting as a gateway to a wide range of funds (which, as Ron Sandler ack-nowledged, was the key to successful investment).