An open approach to one-stop shopping

Graham Angell, product proposition manager at Openwork, answers questions from Sarah Godfrey.

Openwork is a directly authorised, multi-tie financial distributor, launched on June 1. It offers annuities from Prudential, pensions from Scottish Equitable, investments from Sterling, protection products from Zurich, general insurance from Zurich and Paymentshield and mortgages from a panel of 38 lenders. Openwork is 67.5% owned by the advisers, 7.5% by staff and 25% by Zurich. Most of the 2,300 advisers were formerly tied agents for the Zurich Advisory Network.

Q: Why did you decide to go multi-tie?

A: The Zurich Advisory Network was the largest direct salesforce in Britain. Zurich looked at its strategy and decided it wanted to separate its distribution and manufacturing functions, so the distribution business was set up as Openwork. The key to going multi-tie was to enhance and maximise not only the consumer proposition but also the adviser proposition. Looking at the IFA networks it is clear that model is struggling in the marketplace. It was felt a multi-tie model would benefit all parties – consumers, advisers and providers. The providers benefit from exclusive relationships and the ability to work more closely with the advisers. Also, from a purely financial point of view, the exclusive nature of the relationships and the certainty of business volumes is a plus. We are in five-year contracts with the providers (it cannot be any longer because of competition law) so we are looking to develop a long-term relationship.

Q: Who are your members?

A: We have both former Zurich Advisory Network advisers and some new members. The cornerstone of the aim of Openwork was to “re-recruit” 99.9% of the ZAN population. We have also been actively recruiting in two major markets – mortgage brokers, for our mortgage, protection and general insurance business, and in the IFA market for pensions and investment specialists. We have about 2,300 advisers in about 900 businesses and we want to increase that to 3,000 by the end of the year and further as the business evolves.

Q: How were the multi-tie partners chosen?

A: On the mortgage side we have a panel of 38 lenders, which is different from the other ties, which are on an exclusive basis. We wanted one product provider each for protection, pensions, pension annuities and investments. We ran a tender process, met with the shortlisted providers – typically four in each space – and then had further meetings about their infrastructure, IT capabilities and so on, so the decisions were not made solely on product range and cost. Once we had got the three major providers on board, at the smaller product level it is not such a big formal tender process. But down the line if we needed a new major provider we would use the invitation-to-tender process again. The tender process began with a 50-page questionnaire sent out by CapGemini. We used an external consultant, as Openwork didn’t actually exist at the time.

Q: What kind of products can be accessed through Sterling, the investment partner in the multi-tie?

A: Investment bonds, Isas, unwrapped mutual funds and Isa/Pep transfers. One of the key criteria in our tender process was to have a multi-manager fund proposition. Sterling is not an asset management company – it has a panel of 100 or so funds from external providers that are available in all the different wrappers. We have limited direct relationships with fund managers, though we are looking to develop them. If fund managers come to us – as Arc Fund Managers has done with its European Property fund – our first preference is that the fund be offered through the Sterling wrapper, as long as they can agree terms. It is not a fund supermarket product in the mould of Skandia or Selestia. We see it as a “best of breed” selection of funds.

Q: Will you stick with just one tie on the investment side?

A: In some ways you could say it is our biggest multi-tie panel – it offers access to 50 fund management groups, so I think it is genuinely multi-tie. But we are also looking at other investment areas where we would bring in different partners, such as structured products via Newcastle Building Society. We are tendering for offshore investments such as bonds, funds, regular savings schemes and money market products, and currently have a shortlist of five. We are also looking at guaranteed income bonds of the type marketed by Pinnacle and AIG Life.

Q: How are your advisers paid?

A: The proposition is geared around both income and capital options – the capital option is one of the unique elements. The income element is commission-based, with initial and trail commission as a proportion of funds under management. This is paid by the product providers to Openwork, and passed on by Openwork to the advisers. On the capital side, advisers own 67.5% of Openwork; we also offer the facility to buy and sell members’ businesses.

Q: Who is your typical customer?

A: With 2,300 advisers the core of the proposition is around the mass market/mass affluent constituency. It centres on the cornerstones of financial planning – mortgages, will-making, saving for retirement, insurance and so on. Having said that, some of the more profitable London and South-east-based members do deal in the high net worth market, and we are forever looking at how we can enhance services to that market. We also have very high penetration in the small and medium-sized business market for things like group pensions and corporate lending.

Q: Which products are selling best at present?

A: Sterling sales have been going extremely well since launch – advisers and clients are very positive and volumes have increased dramatically. The majority of growth is around investment bonds and Isas for the tax advantages. We are also seeing interest in protected profit-type funds. Sterling is one of the market leaders in these funds, so adviser and client confidence in that type of product is very strong.

Q: Was there a bias to Zurich group companies in your choice of multi-tie partners?

A: We were under no forced pressure from the parent to choose any of the providers. The Sterling proposition in particular was an area that was being demanded by our advisers. Although Sterling is part of the Zurich group it wasn’t available to the old tied salesforce – it was sold only through IFAs. Sterling offers access to the best funds in the market but is not a supermarket bucket shop – this was a clear advantage for our advisers, as shown by our research. Also, because it offers access to external fund managers it is genuinely viewed as a multi-tie panel.

Q: Does Openwork aim to be a one-stop shop for people’s financial planning needs?

A: Yes, that would be the goal and it is where we are looking to move the product proposition. We have been approached by companies wanting to partner us for current and deposit accounts, which is out of our core area. We need to look at that in terms of moving towards a wrap-type service. We don’t really have an option for investors with zero appetite for risk, as we don’t offer a deposit account, and it would be fantastic to have that solution. But we want to sort out our offshore offering first.