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The Clamour for Integrated Distribution

It looks as if the market is finally picking up after the challenges presented by RDR.

RDR Implementation

There have clearly been winners and losers. In the lead up to RDR implementation we saw almost total withdrawal from the market of most of the UK Retail banks and the subsequent knock-on for product providers whose loss of distribution and mounting technology costs seemed to lead to continual restructures and shedding. 2013 was a year for consolidation. Most providers and many distributors spent the year battening down the hatches, looking to see how and if they could survive and how consumers would react to the changes.

During the start of 2014 the adviser market seemed to settle down. There were a number of acquisitive IFA firms seeking to buy up client banks of wealthy investors and demand for good advisers is beginning to turn. As a result the product providers appear to have been displaying some confidence which has been hardly evident since 2008 when the financial crisis began. In particular, there seems to be a general recognition that companies with vertically integrated models i.e. manufacturing and distribution, may be a way to go.

St James’s Place & Hargreaves Lansdown (love them or hate them) seem to be the biggest winners as scalable models, having just entered the FTSE, and many other companies are taking admiring glances to see how they can copy their ideas. If we are to believe that the integrated model is most likely to succeed, we will see more mergers to ensure a company has its own fund managers, platform products and distribution. The most obvious example is the recent Old Mutual purchase of Intrinsic but we have also seen The Russell Group purchasing In Partnership and others look set to follow, which poses a whole new set of opportunities.

These financially strong firms are happy to purchase client banks and skilled advisers but will also need to adopt a cooperative environment to ensure the various parts of the business achieve mutually beneficial success.

"Financial Adviser"

A recent article in “Financial Adviser” stated that Friends Life owns Sesame Bankhall Group, Aegon owns Origen and Zurich owns a significant part of Openwork so it reminded us “over half the advisory population now works for a company owned by one of the major product providers and most of these offer restricted advice.”