Sesame will not longer offer a network home for retail investment advisers, in a move it has blamed on an RDR-inspired “natural migration” towards direct authorisation that is providing a challenge to the “basic premise of the network model”.
The comments came in an email note to principals of Sesame authorised firms, seen by FTAdviser, on the day the group publicly announced in an update to a two-year strategic review that those currently in its network would need to go direct or switch to a rival.
As part of a “commitment to offer choice”, firms preferring to remain as ARs will be able to move to a new network partner. The firm said talks are already underway with another advisory group to offer a ‘preferred partner’ option and advisers will also be supported to go elsewhere.
Retail investment advisers will only be able to remain within the group by going directly authorised with support form Bankhall.
The direct message to network members states the group was starting to see a natural migration towards wealth firms becoming directly authorised as the “flexibility it provides can more easily support the more individual requirements of providing wealth advice”.
The note, signed by Stephen Gazard, managing director at SBG, adds: “We strongly believe that the trend for firms like you will be to migrate towards direct authorisation and we have concluded that strategically it is the most sensible route for us to focus.”
It continues that post-RDR increased need for individual flexibility at a wealth firm level challenges the “basic premise of the network model”.
Further contact will be made during April in relation to timeframes for implementing the changes. The group confirmed it will develop the growing Bankhall and mortgage businesses, including retaining an AR network option for mortgage firms.
The notes makes no mention of a spate of fines and regulatory enforcement, including a major past business review on pension transfers, which have cost the firm millions of pounds and pushed it into large losses in recent years.
Aviva, which recently confirmed the takeover of Friends Life, threw doubt on the future of SBG at the start of the year, pointing out that the distribution business is only viable thanks to currently “open-ended” financial support.
Sesame, the UK’s largest and oldest advisory network, made losses of approximately £19m for the 2013 financial year after it was hit with fines for past mis-selling.
Friends Life began a strategic review of SBG in early 2013 in order to address the financial uncertainty of the businesses and to “address the structural issues so as to reduce or remove the need for financial support”.
The review already moved it to a wholly restricted advice model, operating through two strands including a panel-based service. Deals with providers as part of this were responsible for a regulatory penalty of £1.6m last year.
John Cowan, executive chairman of SBG, stated: “We wish to emphasise this is an update on our ongoing strategic review and we will be sharing further details with advisers in the coming weeks.”
He added that the leadership team has been focused on putting the business on a sound financial and regulatory footing, whilst developing a plan to build a profitable and sustainable business for the future.
“Our objective in the re-structured group is to play to our strengths. In the mortgage market we will continue to operate our market-leading PMS mortgage club and our appointed representative network for mortgage firms, together representing around 25 per cent of all UK intermediated mortgage lending.”
Andy Briggs, group chief executive of Friends Life, commented: “I am confident that these further initiatives will contribute to developing a successful, profitable and attractive business building on the established strengths in the mortgage business and Bankhall.”
peter.walker@ft.com
