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Fund supermarkets’ legacy issues offset by their scale, says E&Y

by Jun Merrett on May 14, 2013 at 08:09

Fund supermarkets’ legacy issues offset by their scale, says E&Y

Fund supermarkets still have an advantage over smaller platform providers despite the impending legacy rebate ban, according to Ernst & Young (E&Y).

Shaun Crawford, global insurance leader at E&Y, said platforms needed to build scale to ensure they made profits in the future.

He argued fund supermarkets’ legacy issues were offset by their size and bargaining power.

‘These organisations that have scale with large back books have the bargaining power,’ he said. ‘[They] have the assets to have conversations and leverage deals with other companies.

‘To make a margin and a profit, platforms need scale to invest. Lots of platforms are relatively small, so to invest and develop wider propositions is very tough, especially with UK compliance costs.

‘There is lots of innovation, but to develop and invest, you need scale and that is the challenge,’ said Crawford.

5 comments so far. Why not have your say?

Simon P via mobile

May 14, 2013 at 09:23

I disagree. Many advisers are 'tied' to fund supermarkets because they don't want to lose their trail. Now this will disappear by 2016 advisers may consider moving platforms - and electronic re-reg will make this even easier. Many advisers will be happy with the fund supermarkets of course - im not suggesting trail is the only reason many stay with them - but I suspect it is for a large percentage and so I see this as a massive threat to the supermarkets and a real opportunity for the smaller Wrap providers.

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May 14, 2013 at 09:40

Why are we being subjected to these continual musings from E&Y ?

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May 14, 2013 at 09:55

Legacy books are under threat as many of the products are no longer fit for purpose. I imagine that the old life office models and archaic supermarkets are seeing a great deal of money leaving!

The recent excellent success of some of the newer platforms no doubt is created by money from the old propositions.

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Chris Macdonald

May 14, 2013 at 10:37

We have seen something of an inverse relationship between scale and profitability in this part of the industry.

The 'legacy' books of those businesses who have used platfoms as a distribution mechanism will no longer be abke to cross subsidise the businesses come 2016.

How will they achieve 'scale' at this point in time? They can no longet buy up distribution through commission or 'rebates'. The true winners will be those who can innovate and offer the products and services truely required to produce great client outcomes.

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May 14, 2013 at 12:35

E&Y are clearly trying to drum up some consultancy business...

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