CompaniesFeb 26 2015

More providers to buy their way into advice

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More providers to buy their way into advice

More life insurance companies and other providers are likely to move into direct distribution this year as a way to acquire scale and protect assets under management in an increasing segmented market, major adviser support firms spoken to by FTAdviser have predicted.

Speaking to FTAdviser, Mike O’Brien, managing director of TenetConnect and TenetSelect, and Matthew Timmins, joint managing director of support services firm Simplybiz, told adviser they expected more deals to secure distribution from especially life companies.

Mr O’Brien said Tenet was aware of two ongoing consolidation ‘plays’ going on right now, and to a lesser extent a third.

“There has to be the potential for more providers or fund managers to acquire distribution as a means of protecting and growing funds under management, as scale is important.

“There are also certainly a number of aggregators out there right now who are acquiring relatively modest size financial adviser businesses with a medium term view of selling or listing the consolidated business in a few years.

“Finally, we are seeing some indications that providers intend rebuilding some of their own internal advice capability,” he added.

Mr Timmins agreed, citing a number of moves into advice over the past two years and particularly since the Budget changes which are expected to be a boon for the sector.

He added: “I’m not sure what the next iteration is going to be and I’d question whether these providers will be looking at face to face or online advice capabilities, but many are looking to build their distribution networks.”

Earlier this week, a Fundsnetwork survey of over 200 advisers found that over half had already seen a positive impact on their businesses as a result of the reforms, with just under half of that group stating the main benefit was an increase in the number of enquiries over access options.

As FTAdviser reported last week, growing demand for retirement advice was one of the main reasons behind Standard Life’s acquisition of Skipton Building Society’s Pearson Jones advisory business and planned national roll-out.

The group’s UK and Europe chief executive Paul Matthews said that further takeovers are likely, as the advisory arm looks to target the mass market and those retirees coming out of Pension Wise guidance sessions looking for actual advice.

Mr Timmins pointed to a growing desire for distribution exposure since 2013, starting with Russell Systems’ deal for 600-strong IFA network On-line Partnership Group, Old Mutual Wealth’s acquisition of adviser network Intrinsic last summer, and Prudential’s move back into distribution in the autumn.

Last week, Aegon rebuffed suggestions that it was planning a Standard Life move into the advice market, stating that it does not want to compete with advisers, although it does still own adviser network Origen Financial Services.

Chief executive Adrian Grace explained that it is a standalone business with its own separate governance and it is not the group’s intention to turn it into a direct field-based Aegon ‘sales force’.

Zurich also confirmed to FTAdviser that their focus is only on supporting advisers. Aviva were more non-committal, with a spokeswoman stating: “With the freedom and choice changes taking effect in April we are still working through our plans.”

Mr Timmins suggested that there is room for the remaining life and pension companies to make their move, but he also raised the concern that many may not actually “plug the middle ground” left out in the cold in recent years.

Many IFAs rely on wealth management models, where advice is only given to those clients with a minimum amount of investable assets suggested to be between £30,000 and £50,000.

“I’m yet to see an online model that works appropriately. I’m sure the solution is out there somewhere, but I haven’t found it yet.”

peter.walker@ft.com