A clearer picture is starting to emerge of the distribution plans that product providers have for the depolarised world.
Zurich and Axa are both known to see multi-tie distribution as the way when the new regime finally comes into place, with Zurich looking at a hands-on approach while Axa is looking at a flexible approach tailored to an IFA's circumstances.
However, both Axa and Zurich are denying that Money Marketing's disclosures represent their full plans.
Zurich is understood to be offering IFAs a 10-year deal with an initial cash payment and buyouts of up to five times annual earnings. IFAs may find the idea of a golden hello and golden goodbye appealing, many advisers warn about signing up to a deal that also requires targets to be met for a decade.
Pi Financial chief executive Tim Sutcliffe says many IFAs will find the offer tempting but should watch out for the sting in the tail. Sutcliffe says: “Ten years is a long time – nobody knows what the industry will look like in 10 years time and I would not want to sign up to a 10-year sales target with the risk of having to pay back some of the up-front payment if targets are not met.”
Sutcliffe says: “The number of IFAs who want to get out of the industry is surprising but if they could only hold out a little longer and come together in IFA groups, then that critical mass will mean they will be able to realise their potential fully over the next two or three years.”
Both the Zurich and the Axa plans see some level of bifurcation – splitting into two parts or branches -the multi-tied and the independent.
But Lucas Fettes & Partners (Financial Services) managing director Michael Hart believes for most IFA firms this process will be a painful one likely to throw up challenges without a clear strategic gain.
Hart says: “There will be some major problems on the bifurcation route. Which staff do you put in the multi-tie side? Will they want to go? Which clients do you put over to your multi-tied side business – and will they want to go?” The Axa approach proposes a flexible, volume-driven approach, tailored around regional IFAs which will operate as hubs for recruitment for intermediaries, with Axa offering technology, training and competence, recruitment services, business consultancy, professional indemnity cover and enhanced commissions.
Axa sees its experience operating a tied agency network and direct salesforce on the Continent in non-polarised countries as offering it an edge – but making that culture fit with IFAs in the UK will not be easy.
Bankhall director of marketing Tony Murrell says: “Advisers will not want to go back into a tied environment. Many of them have come from there in the first place and will not want to return. If they do, they will suddenly find themselves a very small part of a very large organisation. They will have to look very carefully at what strings are being attached before signing up.”
Standard Life, which has so far taken no stakes in IFAs, is sticking to its strategy of leaving distribution to the distributors. It thinks that the majority of firms will remain independent and says it will aim its energies at intermediaries who offer a whole of market advice proposition.
Standard marketing director Barry O'Dwyer says: “We have no plans to enter into competition with distribution firms. Our strategy is to remain committed to the IFA market. We do not see a compelling case for IFAs to take the multi-tie route – whole of market status would appear to be a better bet.
“The decision to multi-tie is for IFAs themselves but if they decide to take that route, we think our proposition means we would be one of their partners.”
Aegon appears to be somewhere between the two extremes – on the one hand, having significant, if not 100 per cent, holdings in a number of IFAs, yet, on the other, at least for the moment, leaving those businesses to manage themselves.
Spokesman Adrian Cammidge says: “Aegon brings financial strength and PI cover to these businesses but we believe in the IFA market and want to allow these businesses to grow on their own.”
Norwich Union has small stakes in a number of large providers but director of distribution strategy Rob Fletcher says direct ownership of the intermediary is not for them. Fletcher says: “Why are IFAs successful? Because they are independent with a small 'i'. Once they are owned and controlled by gargantuan organisations, a conflict develops in the way they work.”
Hart agrees that, for most, IFAs tying will be a culture change too far. He says: “The tied agency way of life is not the way for most IFAs. I have had conversations with people who run the tied operations for these organisations and they do not understand the way IFAs work.
“Signing up with them, an IFA will see his business stifled and he will be strangled in the use of the skills he has developed.”