Sesame: Riding out the storm

Speculation has been mounting in recent months that Sesame Bankhall Group, the UK’s largest and longest established adviser network, is destined to become the first major casualty of the RDR.

Since the introduction of regulatory changes a steady stream of reports have surfaced putting the network’s future into question, including news that its parent company, Friends Life, had put it up for sale, which has been denied, the sudden departure of its chief executive, George Higginson, and the firm’s controversial switch to a restricted advice model.

This flurry of unsettling news and subsequent speculation has triggered all types of debate on the group’s future and left many reiterating previous predictions that large networks would crumble once the regulatory alterations took hold.

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The gloomy sentiment was once again put into focus recently when a report from Cazalet Consulting questioned the viability of networks and warned that the ban introduced on generous “marketing packages” would cripple them.

After examining the balance sheets of Intrinsic, Openwork, Positive Solutions, Sesame and Tenet, the report concluded that “their collective balance sheets looked like they had been given a good going over with an AK-47”.

But of all these major players it was Sesame that has so far been most clouded in uncertainty. Campbell Macpherson, a former human resources director of pre-merger Sesame from 2003 to 2006, agreed that Mr Cazalet's reference to the ban on marketing allowances was hurting his former employer and warned that changes must be made to turn the network back to its profit-making glory days.

According to Mr Macpherson, Sesame’s troubles could be salvaged should it “sell off a few assets” and follow the successful example of St James’s Place, which he claimed had demonstrated that the restricted advice model was valuable. He said: “If I was in Friends Life’s position I would sell the mortgage business and build a valuable restricted model like the one SJP has built.

“Sesame just needs to sell off a few assets to get the cash to turn things around. When I was there Sesame was 100 per cent funded by providers and getting providers to fund marketing, advertising and that kind of thing. Now you need to get your value from advice.”

Mr Macpherson explained that the major difference between his former employer and SJP was that the latter also managed funds. This, he added, could prove to be the difference between success and extinction as the distribution-only model was now “massively challenging if not impossible to succeed in.”

But while some did not perceive Sesame’s switch to a restricted model as particularly damaging, others were quick to point out how big an issue it had become.

Alistair Cunningham, financial planning director at Surrey-based Wingate Financial Planning, said that after 25 years of telling consumers that independent advice was best it was natural for there to be a backlash against the concept of restricted.