The deal with Tesco Personal Finance will now sit alongside Friends’ existing deals with Countrywide and Greenbee, the insurance arm of John Lewis Partnership, owner of Waitrose. But fears are that it could prompt a flurry of consumers to purchase an unadvised policy over independent advice.
In its interim statement, the firm says the deal, which is expected to complete towards the end of the year, will significantly extend the reach of its protection distribution, with chief executive Trevor Matthews describing the move as “a very exciting development”.
Advisers, however, are not so excited.
Unleash Advise Partnership IFA Adrian Kidd says: “Great news for Tesco and bad news for us as the distribution for them is huge. Advisers may not see this as a threat but I would yes, especially coupled with the news that Tesco is looking at opening banks. This could really take off.”
CBK Colchester principal Peter Chaborn says he fully expects more providers to follow suit as they look to diversify their distribution channels.
He says: “I wouldn’t criticise them for doing so, however, it will become increasingly difficult for them to claim to fully support the IFA community when they are also supporting a distribution model which is in direct competition.”
Highclere Financial Services partner Alan Lakey says while the tie-up poses no threat to the IFA market, Friends does not have a “particularly high public awareness so it will not carry any particular appeal”.
He says: “It is likely that the plans will be bought by people who fail to understand the significance of independent financial advice and simply believe that they are all much of a muchness.
“This means that should one of these purchasers ever speak to an IFA they may find that they are able to obtain better value for money elsewhere.”
Thus far, Tesco has been using Direct Line for its life and critical illness plans, Marks and Spencers uses HSBC for life cover whilst Sainsbury’s uses Legal and General for their life cover. Boots, who is rumoured to be considering a move into personal banking, sells LV= protection plans. All deals, besides Lifesearch and Asda which is an independent and advised deal, are tied and direct to one company.
Lifesearch senior policy adviser Matt Morris says: “It would be better if Tesco had followed Asda’s lead and sold protection with independent advice, as that gives customers access to a full range of products and providers as well as a tailored advised service.
“However, Friends Provident are undoubtedly a respected provider with a good range of products, although without offering advice Tesco are not going to be able to properly sell important products like income protection.”
From a technology perspective, Finance and Technology Research Centre director Ian McKenna says the move shows how the financial services market is evolving, and predicts a new range of protection distribution channels opening up over the next 18 months.
But he says: “Such services are complimentary to the IFA market and should help to fill the overall protection gap in areas where people cannot afford the cost of advice.”
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