Altus

The old adage that financial products are sold not bought was an amusing observation whilst there was still plenty of incentive for distributors to go out and sell. Now that it is clear the FSA is determined to remove that incentive, it looks more like an epitaph for some parts of the industry.

Whilst fee based charging is being enthusiastically adopted by a few larger distributors, it seems clear that it will only appeal to the high net worth market, leaving large swathes of middle earning employees out of reach of the “sales-force” of the financial services industry in its current form. The FSA's RDR regulations make it clear that corporate pensions will not escape the FSA purge on commission payments either – putting a final nail in the coffin of many existing provider business models.

Add to this scene a growing public disillusionment with pensions as deficits balloon, DB schemes close and benefits are trimmed and you can see why insurers are asking themselves some fundamental questions about strategy for their investment business. One result has been the emergence of a whole new corner of the investment sector known as Corporate Wrap.

While there is still debate over what exactly corporate wrap includes, how it relates to retail wrap and whether it should embrace flexible benefits, one thing is clear; the workplace is seen as a key battleground to get to those middle earners and to get them early. The appeal to providers is obvious as it opens a door to precisely that segment of the market which RDR threatens and potentially much more besides. But providers need to be careful not to treat corporate wrap as just another distribution channel for the same old goods.

RDR will change the landscape and providers will not be able to rely on commission sweeteners to get traction with EB Consultants in the way some may have done previously with big nationals and networks. Instead they will need to invest in making their proposition simple and appealing over years for employers and employees alike. And that introduces a whole host of new challenges for providers who have been accustomed to a focus on new business and sales relationships.

Ad-hoc contributions and withdrawals, the ability to view investment portfolios across products, switch asset allocations quickly and cheaply, links to other accounts could all be features which attract employees. Employers will be looking for ease of integration with payroll for contribution processing, with HR systems for new joiners and leavers, with ledger systems for accounting and reporting and the guarantee that tax rules are being properly managed across the workforce.

Of course these are all just examples and anecdotes; a full list of corporate wrap impacts should be based on a comprehensive model of business capabilities, the products they support and business processes which will use them. There’s no escaping the need for a lot of hard work and analysis to get to these but Altus can offer some robust L&P reference models in all three areas which would help to speed up the process.