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Will Lynx be laughing all the way to Bankhall?

As software house Lynx buys Bankhall for 114m, it seems almost as if no

self-respecting techno^_logy player can be seen without an IFA division.

But the spate of marriages between IFA networks and software companies

begs ques^_^_tions of what is in it for both parties – apart from the 5m

payout to Bankhall members.

What is now the UK&#39s big^_gest IFA network, software house Misys, has been

scooping up networks and now boasts more than 4,000 registered individuals.

DBS-owned Assuresoft is an ever increasing part of the network&#39s strategy

to become DBS.com.

The Exchange has a strategic alliance with CMG which gives it access to

several nat^_i^_o^_nal IFAs, including one of the most acquisitive, Towry

Law.

At first sight, the tie-ups look like marriages of conven^_ience, with the

network getting easy access to technology while the software house

inc^_reases distribution.

But this glib answer throws up even more questions. What are the main

driving forces behind this strategy? Are the liaisons set to last or doomed

to failure?

Bankhall says it can now “strengthen its IT service to meet the

requirements of the increasingly complex financial services market”. It has

already begun to use Lynx&#39s IT expertise by developing a por^_tal for IFAs,

e-bank^_hall. com, which will be laun^_ched in the summer.

An additional boon for Bankhall is Lynx&#39s expertise in the mortgage

market. It installed systems for Standard Life Bank&#39s Freestyle mortgage

and is currently putting in systems for Halifax&#39s stand-alone internet

bank, Intelli^_gent Finance.

Aside from these projects, Lynx supplies technology to banking and fund

management giants such as Barclays, Credit Suisse and Royal Bank of

Scotland.

It says teaming up with Bankhall will enable it to bec^_ome a “whole

service offering” and that being a software pro^_vider on its own is not

enough in the long term.

Bankhall head of business operations Tony Murrell says the portal will

confer several advantages on IFAs such as greater efficiency, speed and

more comprehensive product information, all of which will combine to raise

the standard of professionalism.

Bankhall insists that the portal will complement rather compete with

existing services. It is envisaged as a central acc^_ess point for a whole

raft of services designed to assist the IFA.

They will be able to compare quotes in real time, make transactions and

download information on to their own systems. Other features of the site

are regular news bulletins and share trading.

Bankhall says there is a benefit for product providers in the deal,

namely, fast and easy distribution. Nine have signed up so far.

Distribution is a word which crops up a lot when talking about financial

services these days. Lynx chief executive Richard Last said at the time of

the Bankhall deal: “Bank^_hall&#39s high-quality membership will provide an

excellent distribution channel to an influen^_tial purchasing community.”

DBS chief executive Tony Kempster explains why distribution is key. “In a

market which is aiming to reduce costs by between 2bn and 4bn, the race is

on to become one of the dominant players and to be placed to benefit from

the paybacks of all the cost cutting and the move online,” he says.

Kempster believes all parties benefit. IFAs spend less time chasing paper

and more time on clients, networks cost less to run and life offices can

increase revenue.

Bankhall says the move to cut costs has been provoked by the industry

bogeyman – stakeholder.

IFA and Bankhall member Massow Financial Services operations director

Fania Sto^_ney says: “All IFAs who see the future realise they have to cut

costs in order to provide stakeholder schemes and the obv^_ious way to do

it is thr^_ough technology.”

But not everyone thinks technology is the panacea for the stakeholder era.

One dissenting voice comes in the form of CMG life and pensions marketing

director Phil Duke.

Duke says he saw a similar cycle 12 years ago when life offices bought up

small software houses but did not know what to do with them.

He says linking up with a software company can be a false comfort and

claims most Misys members do not actually use its software packages.

Duke warns: “Things can get incestuous. You do not get the same level of

investment when you have these link-ups. The only way to satisfy the

cus^_tomer need for continuous investment is by having acc^_ess to the

whole marketplace.

He sees only a short-term benefit to networks teaming up with companies

such as Lynx – access to cheap software. He sees no benefit to the software

houses because other networks and nationals will steer away from using

their services.

But Kempster counters this assertion with the argument that link-ups

between technology and distribution will not res^_trict competition but

make it easier for out^_siders to come into the UK market, thereby adding

to com^_petition.

He is at pains to point out that the industry ignores tech^_nology at its

peril.

Bankhall, for its part, says it is simply moving with the times. He says:

“Bankhall will be different to the Misys acq^_uisitions because the

management team will remain unc^_han^_-
ged. There will be continuity

and certainty. We are both solid organisations that are pooling resources.”

DBS believes that no one company will be dominant. Instead, it says there

will be up to four major players.

Technology consultancy Financial Technology Centre director Ian McKenna

says: “There is a battle for resource. Life offices will find it a

str^_uggle to deal with a large volume of portal proposals. It will become

like the Scottish football league with a couple of major players and

certainly
no more than four.”

Technology promises to make some of the bigger IFAs leaner and meaner as

margins are forced down. But whether it proves a winning formula only time

will tell.

Smaller companies fund still dominate the unit trust table at the start of

the second quarter although the returns are significantly lower than a

month ago.

Artemis UK smaller companies is leading the table with a return of 185 per

cent while Beacon Investment, which invests in Aim stocks, is close behind

with a return of 172 per cent. A month ago, the top fund, CF-Bio-Tech, had

returned 307 per cent and Duncan Lawrie smaller companies was up by 306 per

cent.

The Duncan Lawrie&#39s fund is now in third place, having increased by 160

per cent.

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