Phil Loney, group chief executive of Royal London Group, is concerned about the development of other life offices buying financial advisers.
He said: “I think generally the trend of providers buying advice businesses is a worrying one, and it’s hard to see how that’s going to improve value for money across the market. It’s all going to go into shareholders’ pockets.
“There’s sufficient competition in the market to give the value back to the customer. If they (for example, Standard Life) are operating an open market model, then L&G would be on the panel. That’s fine, but the reality is that you tend to find over time, the platform becomes Standard Life.
“I’m concerned that as we see more and more evidence of providers starting to buy up advisers, there’s pressure on impartial advice, and over time more and more control being placed over where an adviser can place their business.”
Mr Loney, whose company made £277m pre-tax profits last year, believes the solution to the advice gap is already out there.
He said: “We need to be making sure we have impartial advice and we grow the impartial advice community. That gives you the best value for money, as a clear recommendation of what to do. That’s a really healthy place.”
Royal London, with £87.5bn of assets under management, is the largest mutual life and pensions company in the country, and this is one of the reasons that Steve Webb, former pensions minister, joined as director of policy and head of external communications.
Mr Loney said: “Somebody who knew Steve Webb contacted me and asked, had I thought about whether I could work with Steve Webb.
“I hadn’t really thought about it, but it came at a time when I was thinking I wanted Royal London to be more influential in policy, and the individual said that Steve would have felt much happier working for a mutual.
“I didn’t always agree with everything Steve Webb said and did as a minister, but when you’re debating with someone like that you respect them, and he did a lot of good things.”
Mr Loney thought Mr Webb could make a great contribution to debates about pensions and saving, and after some discussions, the former minister agreed last summer to join the mutual, taking up his post in November.
As a result, Mr Webb has been very actively raising the company’s profile and spearheading several campaigns, not least the campaign against the Pension Isa.
But for Royal London, big business means developing auto-enrolment and income drawdown, a growth area since pension freedoms. The business’s interest in annuities lies in its development of the Annuity Bureau, which helps clients without an adviser compare products from other companies.
The auto-enrolment division operates 5,000 schemes on behalf of 320,000 members. Mr Loney said: “The proposition is that we give you more help to set your scheme up, because if it’s set up well in the first place, we hope it maximises the longevity of the scheme.
“We are starting to see a secondary market emerging, particularly among employers who are unhappy with the service they’ve received – we tend to be a strong contender for that. A number of competitors have struggled.” He has seen rivals – big names in the field of pensions – lose business to him.
Future growth in this sector, given that all relevant employers have to comply by 2018, arise from other opportunities.
Mr Loney said: “The contribution levels are rising towards 8 per cent. How can you start to engage people towards making greater contributions?
“It’s a scale game, and it’s very long-term. We’re in it because we’re a mutual organisation.” What would be the point, he added, of being a mutual if it did not offer access to the greatest contribution to financial capability?
The other big change in pension policy in recent years – pension freedoms – has also been good for business.
Mr Loney said: “Over the past four years that predated pension freedoms, the size of business has doubled in retail sales, in terms of assets under management.”
He said: “We’re winning drawdown business, but two, three, five years before it gets to drawdown. They’re getting themselves sorted pre-retirement, and making the decision when they’re going to switch.
“We also have a substantial book of customers with very small pension pots. What they’re doing is they’re taking the tax-free lump sum, leaving the rest invested and taking small pockets of cash out, as and when they need, like the retirement bank account idea.”
He said a lot of people with small pots are using some of their money to pay off debts, but added: “You will still have a better retirement than if you left it in your pension scheme.”
Mr Loney has been at Royal London for five years, joining from Lloyds Banking Group, where his last role was managing director, life and pensions. During his time at the mutual, he has made acquisitions, including the purchase of the Co-Operative’s life and pensions and asset management business. He has no immediate intentions for acquisitions at present.
He is not worried about losing a senior executive to LV, whose group chief executive Mike Rogers, is leaving.
He said: “We like to think of them as a sister company – we compete a bit, but they’re mainly general insurance, and we’re long-term savings, although we have similar qualities in many ways.”
Melanie Tringham is features editor at Financial Adviser
2011 - to present Group chief executive, Royal London Group
2003 - 2010 Managing director, general insurance then managing director life, pensions and investments, Lloyds Banking Group
2000 - 2003 Chief operations officer, UK Life and pensions, Axa
1997 – 2000 Managing director, direct business, Aviva,
1995 - 1997 Sales and marketing director, Saga Services
1986 - 1995 General Manager, Lloyds Bank Insurance Direct
Also:
2012 - 2014 Vice-chairman of Association of Financial Mutuals
2011 - present Board member of ABI