At the moment, life company direct-to-consumer propositions do not involve a sales force. Instead, they are either telephone-based or work through relationships with third-party organisations that themselves have similar target-customer bases – supermarkets, energy providers, even football clubs.
While cash ISAs and loans are offered, along with such staple products as credit cards, life, car, pet, travel and home insurance, investment products are a million miles away from this list, because the customer needs advice. The good thing is that RDR is pushing advice to the top of the agenda rather than product; the negative is that the cost of advice will leave those with less than £50,000 to invest unable to afford this advice, so there is a gaping hole to be filled. And the buzz on the street is that the life companies are planning to fill it.
At least one firm is rumoured to be hiring 1,000 restricted advisers, and another two a further 1,000 between them.
The life companies that have the clout, experience, knowledge, budget, and all-round wherewithal have to be those of a certain size – Skandia, Legal & General, Prudential, Standard Life, maybe Friends Provident, are the most likely. Perhaps unsurprisingly, none of them are rushing to claim they are recruiting.
Aviva probably rules itself out through other priorities, such as its own investment arm changing strategy earlier this year to concentrate on fixed income, real estate and multi-asset solutions, as well as its poor intermediary and customer service record.
Danger signs
Without doubt, there are danger signs hovering over all of this. For one thing, as life companies are not universally loved by the general public anyway, and their miserable track records of pensions and endowment mis-selling are still fresh in people’s minds.
On the plus side, they are not a bank.
One thing for sure is that if they do re-enter the UK investment market, they should not be allowed to promote their own life funds.
Instead they should offer multi-asset, cautious and balanced propositions, using a mix of low-cost passive funds and the best the active world has to offer– passive only is not the way forward – without the need for too much complex advice.
And do it cheaply.
More negatives are the operational costs, which are huge; the fact that the span of control over the numbers of advisers being talked about will be looked at very carefully by the regulator; and can the company generate the volume of business to cover the costs of compliance?
Step forward Old Mutual…a life company and a bank that owns an investment arm.
It does not have the same abysmal reputation as a bank in the UK, as others with a high street presence do; it was not bogged down in the life company mis-selling scandals; through its acquisition of Skandia, it has access to its Spectrum fund range, so it already has an investment proposition; and it is actively looking to get a greater footprint into the UK investment market.
Does it have the budget and the inclination to build a sales force of restricted advisers? Some are saying “Yes”.
