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Providers ditch network ownership as lack of control hits home
by Jun Merrett on Jun 25, 2013 at 16:01
Providers are beginning to pull out of owning national IFAs and networks as they acknowledge the money spent has failed to buy them control over distribution.
Since the retail distribution review (RDR) came into force at the start of this year, two of the largest providers have pulled away from their long-established ownership of advisory businesses: Friends Life put network Sesame up for sale and Aegon sold national IFA Positive Solution to Intrinsic.
Neither of these events were shocks in themselves, especially the sale of PosSol, which had been unofficially on the market for the past few years. However, Friends chief executive Andy Briggs (pictured) gave an insight into the provider’s thinking behind its sale of Sesame that suggests life company ownership of large adviser firms could soon be a thing of the past.
At the time of the sale, Briggs said: ‘I don’t think big parent-owned life company networks are the future. I think IFA businesses are most likely to realise their full…potential with a different ownership structure.’
Parents’ underlying motives
There are a number of reasons why providers would want to cut ownership ties with networks, including the Financial Services Authority’s (FSA) ‘Dear CEO’ letter, which warned them not to try to circumvent the commission ban through distribution agreements. Networks have also become expensive with the majority posting large losses and being hit by an increasing number of complaints.
The main motive behind the sell-off, however, seems to be an acknowledgment by providers that owning a network does not result in control over distribution.
Rob Waller (pictured above), Aegon’s executive chairman of distribution, said the provider, which still owns Origen as well as stakes in Tenet and Lighthouse, had bought into advice firms with the aim of controlling which products were sold.
‘The anxiety of the industry from a manufacturing perspective is how to get to market. Strategically, insurance companies would be locked out of access to the market unless they owned distribution,’ he said.
Geoffrey Clarkson, independent consultant and former compliance director at Tenet, which is largely owned by Aegon, Standard Life, Aviva and Friends Life, said provider ownership had its roots in pushing products. ‘If you go back 10 or 15 years, there was always a view that ownership of advisory businesses could lead to business advantage,’ he said.
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