Banks and insurance companies are seen as winners from the Financial Services Authority's decision t...
Banks and insurance companies are seen as winners from the Financial Services Authority's decision to change the rules governing sales of funds and other products in the UK, but banking analysts see some companies doing better than others.
LloydsTSB is seen as a non-winner from the situation, says Credit Lyonnais banking analyst Edward Firth, because it already has exposure to the fund industry through its ownership of Scottish Widdows.
And that business has recently had to cut the bonuses on certain types of funds because of the two-year meltdown in equity prices.
Others such as Barclays will do better, he says, because the door has now been opened to them to sell products tied to its services.
Polarisation is not exactly bedside reading, but anybody who is anybody in the financial services industry at present is trying to digest the FSA's proposals.
Previously, sales of financial products was split between independent financial advisors, who were nto tied to any particular product provider, and direct sales by the providers themselves.
The split, or polarisation, in the distribution market came about becasue of mis-selling tactics in the 1980s - think endowment policies.
But IFAs are seen as expensive and non-accessible to the vast majority of income earners in the UK, a situation the government wants to change as part of its shakeup of the way pensions and other benefits are accrued.
Letting the high-street banks sell selected investment products through their branches will not provide the ultimate choice to consumers, but it will provide more choice to a greater part of the population than at present, or so the argument goes.
One result of the proposed rule changes could be a massive consolidation of the advisory sector, but Edward Firth says this will not happen because IFA businesses will no longer be as profitable.
"Why would they buy them? Where is the money going to come from?" he asks.
It would be more profitable, he says, for the banks to develop multi-tie arrangements, that is, develop links with a select number of product providers.
For banks such as Barclays, that do not have any such business within their groups at present, multi-tieing offers an expansion opportunity.
Firth says, however, that it is impossible at this stage to put a figure on possible boost to the top or bottom lines from entering into the advisory business.
The other sector expected to benefit - insurance -is also seen by some as descending on IFAs to buy out their businesses. Jonathan Sheehan at Dresdner Kleinwort Wasserstein does not agree.
In a note dated 11 January, he argues that "We would be wary of too much enthusiasm - few insurers have a good record of managing such businesses."
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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