Some advisers are wary of Standard Life’s move into offering financial advice, stating that insurers have a track record of failing in advice propositions, as they target to broad a section of the market.
Earlier today (6 February) Standard Life announced it is launching a wholly-owned, UK-wide financial advice business, after agreeing with Skipton Building Society to buy its Pearson Jones advisory business.
The provider stated that the move - which has been trailed by bankrolling IFA acquisitions - was in response to “unprecedented demand” for advice from customers.
Speaking to FTAdviser, Daren O’Brien, IFA at Aurora Financial Solutions, said he suspects there will be a trend for more insurers coming back into the advice market, adding that this has happened in the past and lots of insurers have left the market too.
“As the market opens up and more pensions legislation changes happen, I expect them to get more profits through financial advice by going direct to clients, but I expect them to leave the market in the next couple of years.
“Generally they jump in, spend loads of money on it and jump out. A lot of these insurers fall down because they go for the mass market, as opposed to being more specific about who to look after.”
Ian Lowes, managing director of Lowes Financial Management, argued that the new proposition is not necessarily a good thing for the IFA industry.
“Skipton’s original plan was to expand itself to a national advisory business. I’m curious as to how successful it will be. So often we see insurers with grand plans, but ultimately what is happening here is that they are competing with IFAs - I don’t know how that’s going to sit with IFAs.
“This might affect the advice and support that Standard Life get from the advisory business as a whole, given that they will now be competing for advisory business and IFAs that currently support their platform, but I’m sure it will be well thought through and well managed.
“It’s a very difficult thing to do.”
However, Ray Tammam, and IFA, mortgage broker and estate planning consultant at Fairstone Financial Management, was more positive, suggesting that extra advice in the industry was welcome.
“With the new pension changes in particular, more and more people will need advice, so it’s good for the public if more good quality advice is available.”
Justin King, chartered financial planner at MFP Wealth Management, agreed that there are “just not enough people out there providing advice” and there is a huge swathe of the market that does not get served with the current minimum fees and investments in place.
He said that “down the lower end of scale in the net result it won’t make a difference - it’s more important to get people engaged”.
Mr King also referred to providers who have attempted similar operations in the past. “These national arms fell apart because costs were too high and customers just weren’t getting a very good deal; it was a commissions lead operation.”