Openwork to extend platform tie-ups as FSA spotlight intensifies

New Openwork chief executive Mary-Anne McIntyre said the network will break its exclusive platform tie-up with Zurich UK Life as she expects the needs of clients within its diverse adviser base to draw special attention from the FSA.

The 2,000 adviser network – for which Zurich is currently the exclusive retail savings platform for its single-tie advisers and the preferred provider for its multi-tie and whole of market business – has signed a deal with a second as-yet-unnamed platform to offer investment products.

It is also in talks to add niche platforms for annuities and ultra high net worth individuals.

McIntyre, who moved from Fidelity to take over as CEO in June, said: “We’re going to be in the FSA spotlight with such a diverse adviser base, which has such varied client needs.

“Zurich has been our main proposition around single tie, but the FSA has been very keen about providing options. Openwork has been working at having two platforms powering its single front end: Zurich and one other which we will be announcing shortly.”

In its July policy statement on platforms, the FSA said independent firms will face particular scrutiny around single platform use. IFAs will “in theory” be able to use one platform for most clients, but must be able to demonstrate clear client benefit.

However McIntyre said the FSA’s focus on client choice is just as strong in the restricted space, and the two offerings may be priced differently to reach different clients. She said adding another platform makes good compliance and commercial sense.

“We went multi-tie with protection last year and have seen a 20% – 30% growth in business. The FSA are very supportive of what we’re doing. Diversifying helps the risk element from the FSA’s perspective.”

Single platform use leaves advisers vulnerable, she said: “If there are servicing issues and all your clients are being served by that one proposition, it affects them all. That makes you vulnerable. At Fidelity we saw only 20% – 30% of advisers follow a single platform strategy. The rest were concerned with corporate risk and servicing issues.”

However McIntyre is concerned the FSA only just began looking at platforms’ business models in the July paper. The FSA wants to ban both fund manager rebates – between providers and platforms – and cash rebates to consumers but it will delay a decision pending more research. As a result, platform charging rules will not come into force before the RDR deadline of 31 December 2012.

“The FSA is only now working through the business models. This is huge. It’s seismic in terms of the food chain in financial services. Consumer benefit will be the end result, but it will take a few years and quite a lot of pain for that gain. Advisers are caught in the customer-facing storm of all this.”

The switch to adviser charging is already set to shake advisers’ revenue in the early years after 2013, she said: “The change from upfront to ongoing [remuneration] will have an impact on adviser business for the first couple of years post RDR. Revenue might drop a bit. The issue is whether an adviser can sustain this.”

At the moment, McIntyre said 15% of Openwork advisers are going to leave the network or change their business because of the RDR.