Gaining confidence by delivering choice

Sesame is a network providing support services to financial advisers across Britain. These include compliance and regulatory support, access to the latest product research, training and development technical seminars and professional indemnity terms. It also provides access to technology that allows advisers to write their business.

Q: What are the benefits of moving to a multi-tie?

A: I think the benefits depend on the different types of stakeholder, be they consumers or advisers. From an adviser’s perspective, I think the benefit of multi-tie is the access it provides to enhanced services. Multi-tie gives advisers the opportunity to get the best services from providers, and we also see it as a way of enabling advisers to access many different services. We asked our advisers about the top three issues they wanted us to address in planning our multi-tie; these were the costs of professional indemnity insurance, the service from providers and the burden of regulation.

>From a product coverage perspective, we are trying to deliver a best-of-breed service from the providers that our advisers see on a day-to-day basis. The consumer gets clarity and transparency from multi-tie, as well as best-of-breed service without any confusion. If I could characterise multi-tie in a single word, for advisers it would be choice, and for consumers it would be confidence.

Q: Have you gone through the process of deciding who you will tie to?

A: We are getting towards the tail-end of this process. We hope to announce our decision fairly shortly.

Q: What was your process for selecting the groups you will tie to?

A: First, we spoke to our customers, including both advisers and consumers. We also conducted three major pieces of market research, on existing Sesame customers, our target audience of larger companies as well as consumers. What has come out of this research has been the importance of tying to brand-leading providers that provide a broad range of credible products.

Q: When is your multi-tie set to launch?

A: During the early part of this year. However, until we have launched the panel it is difficult to announce an exact date.

Q: How many groups are you planning to tie to?

A: We are likely to tie to four or five providers. This is because we recognise the importance of providing clients with access to a wide selection of investment funds.

Q: What type of service does Sesame currently offer?

A: Our business ethos is that we provide whatever service is necessary for advisers, and that will not change when we go multi-tie. We offer a series of different services, from client support to rate services, and multi-tie will fit alongside these as another choice for advisers. However, multi-tie will not be suitable for every adviser or client. We currently have 7,500 customers and they are not homogeneous by definition; we have to ensure we offer them a wide range of services. The decision to offer whole-of-market or multi-tie services is ultimately up to the adviser as well as the client. If they do choose multi-tie, we will have the service available to back this.

Q: Which funds are selling well at the moment?

A: We have seen a dramatic increase recently in the popularity of multi-manager products. I think this is because of an increased realisation that products are not about the package but more about the underlying investment. Multi-manager products have an element of diversification of risk, but people tend to see them as being better than fund of funds products. A fund is only as good as the manager and investors see a benefit to following managers, because as managers on a fund change, historic figures do not really mean that much.

Q: In how many sectors does Sesame currently do business?

A: We aim to cover all the sectors that the intermediaries cover, including designated investment products such as pensions, investments and mortgages. We have found that peer protection products have been important to advisers in the last 18 months or so. We also offer a core of mortgage-related general insurance.

Q: Will these different areas have separate ties?

A: That is currently under discussion. A single panel will cover our advisers’ core product range, including pensions, investments and protection products. We are still deciding what we will do for general insurance and mortgage business.

Q: What is your view of depolarisation?

A: The key thing about depolarisation is that many people believe it is about doing multi-ties, but it is really about disclosure and helping consumers to understand the way in which they are getting advice. I think depolarisation is a good thing; it provides greater advice on fees and will only drive consumer confidence.

Currently, 70% of adults in Britain do not seek investment advice from an adviser. Clarity will help increase the number who do. Depolarisation will also introduce more competition for advisers, as many will be offering a more competitive range of products. Advisers will have to step up to the plate to remain competitive, but this will be to the benefit of everyone.

Q: How has depolarisation changed the market for advisers?

A: Whether they decide to go multi-tie or not, advisers will have to change the way they do business. This will include adopting a new menu, as well as a disclosure regime. If advisers decide to stay independent, they will have to set up ways in which to charge fees. The impact of depolarisation will make advisers take a long, hard look at their business and position it for the future. They will ultimately need to become more efficient because they will need to become more productive.

Q: What changes do you see for distribution in 2005?

A: The first change that customers will see is that products will now be regulated and their initial interaction with their adviser will change, as they will be made aware of the fee structure and charges. Other changes that will occur later on will involve multi-tie and wrap as well as a growth of focus on asset allocation. The market has historically been product-orientated, but it should really be focused on asset allocation instead. We are heading towards the recognition of the value of advice rather than just the value of a product. This is a key message that the market needs to appreciate.

Q: Which distribution model is likely to succeed in 2005?

A: Each model offers different things to different people. Not every distribution model is suitable for everyone. In my opinion, directly regulated distribution models will be a key growth area over and above appointed representative models.