Sometimes the biggest news stories are those that have long since been predicted. After a spate of hefty fines in recent years and following an epic strategic review alongside which it has amassed large-scale losses, Sesame as we know it is no more. No-one is surprised.
Sesame Bankhall has been on the block for two years, after parent company Friends Life began a strategic review in 2013.
Having struggled to find buyers, new parent-to-be Aviva said it might cut its losses in order to “address the structural issues so as to reduce or remove the need for financial support”. It was only repeating what has been said before, including on these pages.
Already, the review has resulted in the network moving to a wholly restricted advice model, operating through two strands including a panel-based service. It was deals that underpinned this latter that prompted its most recent £1.6m fine last year.
The business was earlier fined £6m in 2013 for failing to ensure the advice it gave was suitable on Keydata recommendations and over broader systems and controls weaknesses. The £6m figure was 50 per cent more than the trading profit the previous year.
Sesame was also slapped on the wrist in 2007 by the FSA for failures in relation to its complaints handling of structured capital at risk products. It’s also undergoing a pension trasfer review that will result in huge redress and was in part responsible for £19m in losses being recorded.
So abandoning wealth advice and concentrating on mortgages, where it has strong market share and rules are far less onerous, is not very surprising. Wealth management ARs can either go direct, switch to a rival, or can be moved to a “preferred network partner”.
I won’t add to the speculation over who this ‘preferred partner’ in exclusive ‘advanced’ talks is, but take your pick among the larger network players which have the capital and would be prioritising distribution volume at the moment.
One thing is for sure, while a firm may be looking to buy a book of business, they certainly will not be looking to take on the liabilities.
Of course in a note sent to its advisers, seen by FTAdviser, the group steered clear of discussing its own problems and instead referred to a “natural migration” towards direct authorisation post-RDR that is a challenge to the “basic premise“of networks.
The note, signed by SBG managing director Stephen Gazard, states: “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.”
Larger networks do have problems, but much of this is related to their past book of business. Without this encumberance the future may be brighter, but controls will be needed that will change the nature of these businesses from how they have operated in the past.
So is the network model dead? Time will tell.
donia.o’loughlin@ft.com
