New distribution door opens for banks

Depolarisation is seen as an important catalyst of change in the UK savings market, where insurance companies have traditionally been the dominant investment product manufacturers and independent financial advisers (IFAs) the principal distribution channel.

Banks now have the opportunity to grow their distribution market share, currently 10 per cent, compared to 70 per cent in Europe, by offering third-party products on a best of breed basis. The third, newly created, category of ‘multi-tied’ advisers can offer customers a choice of investment products from a limited number of providers, while previously advisers had either to be ‘tied’ to a single financial services firm, and advise and sell its products, or work independently.

It has been over a year since depolarisation came into effect, but the process has been a slow one. Michael Jones, head of financial institutions at the UK’s largest mutual fund manager, Fidelity International, said: “We are a long way in the UK from the European model, depolarisation has not greatly changed the position of banking groups”.

He said HSBC is the only bank to really embrace depolarisation so far. HSBC launched a multi-tied advisory service, selling Fidelity’s funds alongside those from four other managers, plus the bank’s own funds.

“None of the other major banks have that multi-tied arrangement,” said Mr Jones, although some of them have adopted different solutions. Barclays chose a manager of manager approach, using Fidelity to sub-advise a sterling fixed income mandate.

“We were traditionally an IFA-based business five or 10 years ago” said Mr Jones. “But our financial institutions business has grown very fast, the fastest part of that growth being with the insurance companies. Also, the wealth manager piece has doubled in size in the last three years” he explains.

Jones: UK is a long way from Europe