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Which providers stand to win (and lose) from the RDR?
by Amy Rowe on Jan 24, 2013 at 15:23
Who’s going to win in the retail distribution review world? Advisers have debated this for years, and recently consumers’ access to advice has come under the spotlight, but what about those poor old providers. Luckily analysts at RBC Capital Markets have had a look at the life companies they tip to win, and lose, in 2013.
With a tight product offering of only corporate pensions, annuities and protection, Resolution stands to do well post-RDR, RBC said.
Business might very well be winging its way back to Resolution this year too, as customers seek corporate pension schemes sans commission. It’s estimated that around 80% of corporate pension schemes lost by Resolution went to competitors who pay commission, something that is now obsolete.
An accidental forerunner of the new model, Standard Life is ideally placed to benefit from the RDR. The company began to cease paying unfunded commission in 2004 because it could not afford to pay commission after losses on its with-profits book. It was forced to look to new model advisers instead. It is those early friendships that will pay dividends now, according to RBC.
Last of the big commission payers, RBC reckons Aviva will struggle post-RDR as it will be hit more than rivals by ‘advisers who churn’ leaving the market.
The analysts said Aviva will instead look to its already strong relationships with bancassurers and try to pick up business from banks and building societies in an effort to recoup losses.
It could however benefit by picking up orphan clients.
Legal and General
Good news for Legal and General in the RDR scrum. With a 25% holding in platform Cofunds, as well as its own platform, Investor Portfolio Service, the company stands to do well in a new world where retail platforms look set to dominate. L&G has strong positions in both annuities and protection, areas that will be less impacted by the regulatory changes.
RBC said the fact that L&G is one of the few companies that is actively targeting the mass market and has sole provider relationships with building societies stood it in good stead.
Platforms being the future of the retail savings market, Old Mutual and its Skandia brand look set to take centre stage, the analysts said. Growth is forecast at 28% over the next five years, and Old Mutual’s offering benefits both consumers and distributors, according to RBC. Compounding this, more than half of Old Mutual’s new business is from emerging markets, which won’t be affected by the RDR.
Prudential isn’t going to be affected much by RDR anyway, RBC said. The company’s focus has been in Asia and to some extent, the US. Insofar as its UK business is concerned, Prudential has been streamlined to cash in on annuities, with-profits bonds and with-profits annuities. These are areas it feels it can make a real difference in, and traditionally areas that have not demanded adviser input.
RBC said the Pru is going to reap benefits from baby boomers on its annuity offerings, and could convert its own pension customers into annuity customers with a rate of around 60%. This will help offset a possible decline in with-profit bond sales – a product where the Pru has maintained its policy of paying commission on.
St James’s Place
St James’s Place won’t fare too badly at all post RDR due to a number of factors, RBC predicts. SJP could potentially clean up while other, lesser prepared companies restrict their propositions or leave the market altogether.
Furthermore, as independence ceases to be a competitive advantage, advisers will move towards restricted advice. SJP’s own distribution network, the Partnership, will also provide much needed support, RBC said. All in all, the ensuing disruption in the marketplace should allow SJP to stand out.