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Categories: RDR| Pensions - Retail| Investment| Life Office
Topics: Ratings| RDR| FSA| life offices
Ratings agency Fitch has warned that life companies which rely on independent financial advisers (IFA) to distribute their products could be negatively affected by the retail distribution review (RDR), and predicted a bright future for bancassurance.
In a special report on the RDR, the agency said there would be no immediate impact on the insurers' ratings, but predicted distribution would shift from IFAs to "cheaper simplified advice, basic advice or no advice at all".
Companies reliant on IFA distribution networks could eventually be negatively affected compared to those which are able to focus on platform or bancassurance, which would fare better.
It also forecast a contraction in the IFA market, and consolidation among adviser firms, and said it expected some banks to invest more in their financial advice services.
Here is Fitch's verdict on seven major life insurers:
Large volume of protection and annuity business, smaller volumes of investment business. Largely unaffected by RDR
Large volumes of protection business and significant corporate pensions business. Protection business unaffected, RDR could have some downside for pensions.
Diversified distribution channels, product mix advantageous. RDR could provide some upside potential.
Runs the UK's most successful platform. Leading platform, well placed for RDR.
Significant internal annuity vestings, and with-profit bonds popular of late. RDR not a significant concern. Bond sales could be affected
Access to largest UK bancassurance network through Lloyds Banking Group. RDR could provide significant upside potential - Fitch believes bancassurance will become more popular.
Advanced and established platform, ahead of competitors. Large volumes of pensions business. Fourth-most popular platform, well positioned for RDR with possible upside potential. Large IFA channel may be affected.
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| Comment | Fitch warns life cos: Don't rely on IFAs |
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Typical
Wow - another positive article from IFAonline.
Posted by: Gaztop
Life Co's not to rely on IFA's
There is no doubt RDR is a challenge to all of the industry. However the failure to think through the consequences is one of the more scandalous. Life companies need to dramatically improve their service proposition if they are to receive IFA support.Bancassurance will probably take some of the low end business but there will need to be an analysis of profit margins here. Ultimately it is down to how many IFA's choose to 'matriculate' that will determine the future shape of distribution.We will need to wait until January 2013 to establish that.
Posted by: Duncan Jones
Really?
Firstly, who are Fitch? And secondly, can someone tell them about this http://citywire.co.uk/new-model-adviser/barclays-financial-planning-arm-to-close/a466159 and maybe this http://www.bbc.co.uk/news/business-14169195 I agree with John Morgan....they go the right answer but for the wrong reason
Posted by: Rob Simpson
bancassurance
rob, looks like their report covers the barclays closure (see p4) - or are you referring to something else?
Posted by: Mark Ife
Unfortunately Fitch is correct
Since the point of the RDR is to achieve precisely what Fitch has indicated their conclusion is logical. The FSA will have slaughtered the industry, killed any vestiges of a savings culture among the public and handed most of what is left on a plate to the direct-to-public insurers and bank assurers. Well done FSA, your mission having been achieved you can take massive payoffs before the re-brand ang new jobs at your old premises.
Posted by: M
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Life Business post-RDR
Surely the advice from Fitch should be the other way around because adviser's who will not be providing a Investment/ Pension service post RDR will have to focus on the Life market if they are staying in the industry!
Posted by: John Morgan