The founder of Cazalet Consulting was commenting on findings from his 625-page Life and Pensions 2014 report, which highlighted how traditional insurers have sunk “vast sums” into their platform businesses to survive post-RDR.
The report, released by the consultancy recently, revealed that the market’s two largest players, Axa and Standard Life, had achieved roughly the same level of assets, £19.7bn, as the three independent providers – Nucleus, Ascentric and Transact (£21.7bn).
However, the traditional life companies boasted share capital that was 10 times larger than the other three, according to Mr Cazalet, showing that larger providers will spend “whatever it takes” to ensure they did not lose business to rivals.
He warned: “We may well see some smaller, lean-and-mean independent players that have reached sustainable profitability, and are capable of achieving on-going worthwhile returns on relatively modest amounts of capital, forced out of the sector.”
This may be as a result of regulatory intervention and/or being discriminated against by advisers prizing size when undertaking due diligence because they do not have what Mr Cazalet called “the fat wallets of the larger, spendthrift life-office heritage players”.
However, he also warned that life companies may be forced to “beat a hasty retreat” if they cannot achieve “adequate margin” and “acceptable sustained payback” on investment.
ADVISER VIEW
Steve Laird, certified financial planner at Belfast-based Carrington Wealth Management, said: “We are doing due diligence right now on platforms, and the amount of time it takes to send and receive necessary information from providers is tiresome. The issue of pricing is an interesting one. When adviser charges are added on top, it can be very difficult to assess what is best for the client.”
