Investments  

Vital that Sesame gets strategy back on track

John Lappin

Sesame has got itself in quite a bind, with huge implications for the advice sector as a whole.

It was rocked by a £6m fine for advice failings around Keydata in the middle of last year. It has set aside £31m for possible failings on pension transfers earlier this year, and in March it reported an operating loss of £19m shouldered by parent Friends Life.

Its appointed representatives have been told that if they are to remain as ARs, they must restrict.

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Yet it has now been fined £1.6m for demanding that providers buy services worth an extra £250,000 – and in one case three times that – for participation on its long-term restricted panel.

ARs may point out the irony of being railroaded on to panels now, when the construction and, until recently, disclosure of those panels has fallen foul of the regulations.

Since January, Sesame Bankhall has been run by John Cowan, arguably the man with the most important job in retail financial services. That change surely helps with the messaging, but it doesn’t make the turnaround much easier.

He told FTAdviser.com that his team is taking a measured look at the panel, but admits that there are legally binding agreements involved.

The scenario surely doesn’t play well for Sesame’s restricted advisers, nor for their clients – even if these are mainstream reputable providers – until those deals come to an end.

Separately, one might argue that previous management blundered trying to navigate the radical financial adjustment required by the RDR.

They may have believed they had compiled with the RDR in an ordinary business sense, rather than avoided it in the regulatory sense, though IFAs facing the full force of the commission ban will have very little sympathy.

The sheer weight of FSA instructions, CEO letters and the like also undermines that argument.

Yet Sesame’s then management must have believed their approach stayed on the right side of the rules.

Any financial journalist will tell you that provider firms that are unwilling to pay to play and believe they have been excluded from a market are always likely to pick up the phone to the regulator.

So I rather think Sesame at the time somehow must have believed – RDR or not – that it could harness its distribution might to turn a shilling or four in much the way supermarkets have done for decades. For networks such a strategy is now closed, which may be the most significant aspect of the whole debacle.

However, it begs the question as to what exactly the model is now. Is there an alternative, compliant route?

The road back surely requires Sesame to create a consumer-focused, research-driven panel that meets all investors’ needs and satisfies its advisers’ business and advice demands, while making sure things don’t become too esoteric.