Last month SLA announced the £3.2 billion sale of its insurance division. This included its retail Sipp, workplace pension business, annuity and with-profits books to closed-book consolidator Phoenix.
While inevitable in many ways, the deal came as a shock to most. With one swift stock market announcement, the 200-year-old insurance stalwart effectively came to an end (although its name will still be used for the products now owned by Phoenix).
But advisers are concerned about the potential implications. They have complained of a lack of communication from SLA and uncertainty over what to expect from the new provider.
Business as usual
Since the deal was announced, senior figures at both SLA and Phoenix have been eager to stress nothing will change for advisers and their clients.
In a piece written for New Model Adviser®, Standard Life chief executive Barry O’Dwyer (pictured) said: ‘To those on the outside looking in, Standard Life’s future may now seem very different. But many things will not change.’
O’Dwyer stressed the Wrap and Elevate platform will stay within SLA. Around 3,000 Standard Life staff will move over to Phoenix and these same staff will still administer the products, which will now sit within the Phoenix Group.
‘Phoenix is intent on protecting Standard Life’s reputation for excellent customer service. It has repeatedly pointed out it makes economic sense for it to look after our customers,’ O’Dwyer said.
For example, the retail Sipp will keep the Standard Life name and will be administered by the same people (working from the same Edinburgh office), even if the product will now be owned by Phoenix. This product, along with the workplace pension book and offshore and onshore bonds, will also stay open. The sales and marketing staff behind them will be kept by SLA.
A spokeswoman for Phoenix said: ‘SLA customers and IFAs should be confident we will deliver similarly high standards of customer service. Phoenix will not be changing its terms and conditions in any way. Customers will have access to the same decumulation products they have today.’
The provider has also stressed its commitment to retaining Standard Life employees, saying ‘its long-term intention is to maintain operational headquarters in Edinburgh’.
Vote of no confidence
But the reality is there is much uncertainty among IFAs.
Mark Polson, principal of the Lang Cat consultancy, said: ‘I understand Barry will want to reassure everyone there is nothing to worry about and it will all just keep on as it is. But it won’t. In the corporate life, you may say what your intent is and try to reassure people, but we all know life gets in the way.’
A New Model Adviser® website poll (which attracted 286 votes) found 83% felt service standards on Standard Life policies would get worse after transferring to Phoenix. Twelve per cent thought they would stay the same and 5% thought it would improve. The same poll run on Twitter concurred, with 82% thinking service standards would get worse.
‘Based on conversations I have had with advisers, I think Standard Life will face some resistance from those who would continue to recommend products that are Phoenix under the hood,’ Polson said. ‘Standard Life will find there is a whole new job needed to be done by its business development managers and distribution teams to convince people this stuff is going to work in the way they expect.’
IFAs who use the Wrap platform will also be affected. FinalytiQ director Abraham Okusanya wrote that those who held Standard Life products, such as the Standard Life Sipp, on the Wrap platform will now find this underlying wrapper is controlled and administered by Phoenix. And that is even if the platform remains with SLA.
David Penney (pictured above), director of London-based Penney, Ruddy & Winter, was dismayed to hear the products that currently sit on the platform will move over.
‘To me, the suggestion was that the Standard Life Wrap Sipp was separate to the disposal. But it turns out now the Standard Life Sipp is going to be sold along with all the other life business because it is owned by Standard Life Assurance Limited. I am not positive about that,’ he said.
Penney also pointed out the messages coming from SLA about the sale had been far from clear.
‘The way the board has communicated this to investors, intermediaries and its own staff has been pretty poor,’ he said.
Helen Howcroft (pictured below), managing director of London-based Equanimity IFA, said her experience of dealing with Phoenix had been painful. She said it had taken a long time to respond to correspondence.
‘What concerns me is what is going to happen to the administration once it gets transferred over to Phoenix,’ she said. ‘Historically, our experience of Phoenix admin has not been very positive. So does it cause a concern? Yes it does, absolutely.’
Although Phoenix has stressed its commitment to keeping all Standard Life employees, little has so far been revealed about its plans for the long-term future.
Phoenix has a history of buying up closed books and moving them to its own back-office technology system and centralising administration. This means it can squeeze margin out of a business that is not generating new profits or sales. Indeed, ‘cost synergies’ from the AXA Wealth book, sold in 2016, have now reached £10 million per year. They are set to reach £7 million per year by 2018 for the Abbey Life book, which was also sold in 2016 by Deutsche Bank.
In the case of AXA Wealth, administration for 45,000 policyholders is being moved to outsourcer Diligentia this month. Data will be migrated across to a new back-office system. Phoenix is warning IFAs this move will cause a period of disruption. It is bound to result in ‘teething issues’, and there have been 60 job losses.
In an analyst presentation, Phoenix said the Standard Life acquisition would lead to ‘cost and capital synergies to create £720 million of shareholder value’.
Phoenix has stressed its commitment to all Standard Life staff in the Edinburgh office. But a spokeswoman said ‘no decisions have been made’ about how the administration of Standard Life policies would work in the long term.
Okusanya (pictured above) said the big question was whether or not Phoenix would replicate what it has done with other books, such as AXA. Will it move to a centralised administration system, rather than stick with Standard Life’s current systems?
‘The way Phoenix reduces costs and increases profits with acquired books is to streamline the technology,’ he explained. ‘It tends to move assets from whatever back-office system it is in to a new one. That tends to create problems, because the new systems may not necessarily work as the old one did. Record keeping might be different.
‘Do the existing Standard Life systems get retained and will Phoenix manage both of them concurrently? I think it is plausible. Then again, Phoenix is very profit-oriented and would need to squeeze the system as much as possible.’
With service expectations set so low, the question is whether Phoenix can squeeze its systems without breaking advisers’ patience.