Old Mutual Wealth has pledged it will allow independent Intrinsic advisers to remain so following the fund manager's acquisition of the network, but advice firm directors predict it will dump them or force them to go restricted.
This morning Old Mutual Wealth - formerly Skandia - announced that it has bought advice network Intrinsic for an undisclosed sum. Intrinsic is one of the UK's largest advice firms with 3,000 members, a mixture of independent and restricted advisers.
Old Mutual Weath pledged that the deal will see Intrinsic's existing management structures and dual business model remain in place.
And, on the future facing its newly-acquired independent advisers, chief executive Paul Feeney said: "What we are saying to the financial advisory market is, if you want to stay as an independent financial advisers, then absolutely.
"We have not taken anybody's options away. What we have done is secure those options and put greater financial stability behind them."
Old Mutual Wealth head of global distribution Steven Levin added: "We are making a commitment to the whole market. We will support all distribution models."
'Not a good deal'
However the directors of several advice firms believe that market and margin pressures will mean that, before long, Old Mutual will strip out the independent advisers and focus solely on the restricted advisers it can use to distribute its products.
Intrinsic chief executive Richard Freeman has already said that the network's "core model is restricted".
"This is not a good deal," Jones Hill managing director Brian Hill said.
"The parent company has to run the business for the benefit of the shareholders not the benefit of the individual advisers.
"This is not good for Intrinsic advisers. They will just become pawns in the bigger players' game. Big players don't have the capability to deal with independent advisers as they have proved time and again.
"Old Mutual will have no need of Intrinsic's independent advisers. Independent Intrinsic advisers should start to look elsewhere if they want to remain independent."
Restricted firm Courtiers' chief investment officer Gary Reynolds expects a post-buyout Intrinsic to become ‘vertically integrated' - where a firm manufactures and distributes its own products - in the model of wealth firm St James's Place.
"I don't see why Old Mutual would buy something without using it [for distribution]. Intrinsic might end up with something like the St James's Place model. It's almost like the clock going back to the Man from the Pru. I bet Old Mutual ditches the independent side. They don't really need it."
Reynolds predicts more advice-side consolidation on the horizon. "This deal might be the start of a sea change with other fund groups buying up restricted firms to secure a regular flow of business," he said.
Independent firm Alan Steel Asset Management director Steve Wilson also believes this is the start of more deals to come - but that clients looking for independent advice will be the ones to lose out.
"We are seeing consolidation in the fund management business so I expect it on the advice side as well. It's probably a good deal for Old Mutual, as historically, unlike other providers, it hasn't had a distribution force.
"I expect that, as more advisers go restricted, providers will look to buy up the larger players. Advisers can still offer good value on the restricted side. But I don't think firms will go restricted just to sell to a provider.
"The only downside is that it is a bit disappointing for clients looking for independent advice. If I was a client going to an adviser I knew was owned by a provider I would have a nagging doubt that they wouldn't be really independent."
Who owns who?
Friends Life bought adviser network Sesame in 2007, but is currently looking for a buyer to sell it to. Sesame confirmed in November last year that it would be dropping its independent mandate and going restricted only.
Aegon owns long-time loss making national adviser Origen. To some, Origen is confused about whether it is independent or restricted. It has a restricted workplace advice proposition and last August Aegon said in its results that Origen will become a ‘tied agent', which Origen then denied.
Network Tenet is owned by four providers; Aviva, Standard Life, Friends Life and Aegon.
Standard Life bought high-net worth adviser Newton Private Clients last year in an £83.5m deal. It also acquired support services provider Threesixty in 2010.
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