The life company is a tricky beast. As its natural habitat is being increasingly made defunct, it is making its way into new territory – the wrap platform space. And advisers should take heed as it could encroach on their own boundaries.
Life companies are having to adapt to survive in the market. They need to find a variety of revenue streams as their traditional space of life assurance and pensions is increasingly outdated, especially with more flexible pensions available on wraps. Big managed funds are in decline as wraps such as Axa make it more difficult for them to operate in the same space. Funds are being transferred into wrap products and life companies are therefore losing out.
The recent acquisition of support services company threesixty, including its wrap, by Standard Life is an example of the evolution of life offices. But how much of a controlling influence can a life company owner of a wrap platform have? There is a possibility that life companies could turn predatory.
With an increasing number of assets on platforms (£100.66bn in a recent survey by Pensions Management) advisers are facing the possibility of providers ending their agency agreements and using wraps instead to access consumers directly.
If the relationship of adviser as agent is terminated by the life companies, where will this leave them? Although those who do not rely on commission will not be affected, others will be somewhere up a certain creak without a paddle.
The big question is should advisers trust life companies and their intentions in the wrap platform space? With life companies entering the IFA space through a distribution role they have the opportunity to heavily influence the regulatory regime. They are also edging towards having the ability to claim clients for their own.
If you want proof, just take a look at the antics of Axa and L&G recently. They wrote to clients about products without copying in the clients’ advisers.
It is essential for advisers to create and market their own brand identity, so clients will be immune to the life companies’ advances. The IFA sector will have to adapt as well, with advisers not reliant on commission but with recurring revenue streams coming out on top.
While some life companies should be commended for their foresight and ability to adapt and survive in the industry, it is nevertheless a worry for advisers. Life companies, through their use of wraps, could become direct competitors with advisers which is not in the best interests of consumers, let alone advisers. As the wrap space grows and life offices evolve or die out, advisers should keep a watchful eye on what happens next.
Sheriar Bradbury is managing director of Bradbury Hamilton