Standard Life has long been seen as an insurer that IFAs could recommend with certainty in their hearts over strength, reliability and good service.
But confidence in Europe's biggest mutual has been dented by its discussions with the FSA over the new realistic reporting regime and its strategic review into its mutual status.
A recent Money Marketing survey shows that 67 per cent of IFAs will not continue to recommend Standard Life for new with-profits business although only 20 per cent will advise clients to transfer out of its with-profits fund.
IFAs – who account for 90 per cent of Standard's business – are more divided on whether its current situation will make them less likely to recommend its other products. Fifty-eight per cent say they will use the company for other products while 43 per cent say they will think twice.
This suggests that IFAs are at a confidence crossroads and are waiting to see what happens next.
Hargreaves Lansdown head of pension research Tom McPhail says IFAs will have a massive influence on Standard's future success but he believes the company will continue to enjoy IFA support, provided it exercises good sense and properly communicates the reasons for the decisions coming out of its review.
He says: “I do not think IFAs will get too hung up about it, provided it is done in a structured and logical way. Mutuality is good but, if it gets in the way of growing the business, then it is time to move on.”
With-profits still accounts for a substantial chunk of Standard Life's business but McPhail says, in terms of new business, it is of diminishing importance and he does not see it hindering the firm. He says: “I think there is plenty of room for it to reinvent itself. Standard has a lot of credibility with IFAs, not just as a with-profits office. It is its reliability, trust, good investment management, good administration and personnel, all of those things that go into making up the model of a good company.
“Standard's credibility with IFAs is not predicated on with-profits so if you took that away the whole edifice would not collapse.”
These thoughts are echoed by Bankhall director of provider management Jonathan White, who says: “Standard Life is not the only provider to be faced with falling with-profits sales and indeed all investment firms are finding the current climate quite challenging. Standard's brand is less about with-profits and more about trust – trust in the eyes of the IFA and trust in the eyes of the customer.”
McPhail says many aspects of Standard's corporate finances depend on with-profits but it can refocus its business activities.
White points out that a lot less of Standard's business is driven from the with-profits engine room than even five years ago.
Standard operates a sizeable broker salesforce but there are questions as to how long it can continue to fund this from dwindling with-profits sales. White says: “They will have to work harder to align to those IFAs who can deliver profitable business and manage the relationships with others in the most cost-effective way. Indications are that it may cost up to £300 per call to put a broker consultant in front of an IFA. As a plc or a mutual, surely this is not sustainable?” Standard Life managing director of sales Nathan Parnaby says the company has no plans to cut the size of its salesforce and that support from IFAs is as strong as ever. He says: “Our IFA salesforce is the jewel in our crown and we have invested heavily in it and our long-term relationships with IFAs.
“Our whole business culture is one of building long-term relationships and there is no question of our pruning our IFA salesforce as a result of short-term issues.”