Are the initial dire predictions for IFAs under stakeholder going be borne out? As April 6 approaches when stakeholder can first be sold, the industry is preparing in different ways to meet the challenge.
Some in the industry believe that stakeholder and the changes to polarisation go hand in hand and are dictated by Government expediency. The 1 per cent charge cap on stakeholder entails was met with incredulity by many IFAs. Stakeholder will need to be sold in volume and new ways of distribution will need to be considered.
Bearing this out are recent tie-ups between Barclays and Legal & General plus Bank of Scotland's arrangement with Axa to provide stakeholder. Standard Life has also done a deal with the Post Office to sell stakeholder.
As the introduction date approaches, it seems likely that more alliances are going to be announced.
Scottish Life marketing consultant Alasdair Buchanan does not see this as a trend, he sees these link-ups as governed by quite distinct considerations.
He says: “Barclays is closing down its own production line. The model they were working to clearly was not going to get results.”
The Bank of Scotland agreement is quite different, he believes, and seems to be a flattering imitation of an IFA's operations, white-labelling the products of different providers. As for the Standard Life deal, he, like many others, is sceptical that post offices will be conducive to selling pensions.
IFA Professional Services chief executive Geoffrey Clarkson agrees with Buchanan that the banks do not offer a serious threat to IFAs, and sees the recent development as the result of failure of the banks to develop their own life houses.
The Prudential's decision to axe its direct salesforce Clarkson believes is further indication of the strengths of the intermediary channel. “IFAs are the most effective form of distribution,” he says.
Advisory and Brokerage Services managing director Gareth Marr says an IFA dealing with stakeholder on a proper basis, which he sees as the provision of advice, also has nothing to fear.
But he adds: “Any IFA who thinks they are going to make money out of selling stakeholder is sadly mistaken.”
Marr believes IFAs should be charging employers for advice. He does not see himself dealing with individuals looking for stakeholder, bar the odd wealthy client looking to set up a stakeholder pension for his or her child, for instance.
But Michael Philips partner Michael Both takes a pessimistic view of recent devel- opments and of stakeholder generally. He says: “Stakeholder is bad news and the insurance companies will be doing all they can to protect themselves.” He thinks the banks will be getting a better deal. “Every man and his dog will be getting a better deal than IFAs,” he says.
Both does not envisage becoming much involved in selling stakeholder. “If an individual come to me and wants stakeholder, I tell them to go elsewhere but if an employer wants advice he might want to talk to me although I am not sure how interested I would be,” he says.
In the long term he thinks stakeholder will be the start of a process that will force IFAs into specialised areas of investment and mortgages.
The very problems that Both sees in stakeholder are issues that Clarkson believes IFAs can turn to their advantage. The cap on charges requires innovation.
He says new technological solutions are being brought forward to enable IFAs to deal with stakeholder effectively and economically.
Buchanan says Scottish Life is offering an internet-enabled system to help with stakeholder admin.
M&E Network members, for whom Clarkson provides support, will be encouraged to offer advice clinics and go into the workplace to offer generic advice. Clarkson says: “Stakeholder appears to be a good idea. It needs to be serviced differently and IFAs are not just going to give up market share.”
Buchanan adds to this by saying: “IFAs in the corporate sector have all the attributes to do really well and build up long-term business from stakeholder and this includes smaller IFAs.”