Kneeshaw said RL360° instinctively knew that Clerical Medical, which it acquired recently, was a good fit and could be successfully integrated. “It was a closed book, on the Isle of Man and the right size. That made the process manageable. We saw it as a perfect vehicle for us.
“The further you get away from home the more regulatory or cultural issues there are and the more difficult it becomes. It does not mean you do not do it, just that it might affect the price you pay or the energy you have to put into making it work.”
Buying another company could either be a “synergy or growth play”, said the panelists, but a key consideration should always be how it will affect advisers and clients.
Kneeshaw said: “Until we acquired it, there was little investment in technology at Clerical Medical. The advisers were really positive about the deal and the clients were neutral.”
Jopp said managing the integration process correctly was crucial if a new owner was to keep clients on side. “We want clients to achieve their goals. It is in no-one’s interest to buy an existing business and for all of those clients to fall away.”
Foy said the integration process his company was currently undergoing had delivered unanticipated benefits, which had helped maintain the trust of clients.
“We thought we would have to fight tooth and nail to keep the business we had. But we have had new exclusivity arrangements proposed simply because the other side believes they are not dealing with a big company that has its own platform, asset management capability and might start to steal clients. We have moved heaven and earth to make sure it does not feel like anything other than a name change to our customers. Our business exists on trust.”
Pain said the inward-looking nature of the international life industry meant that companies often did not realise that “all clients are interested in is that they receive communication on a regular basis and they are able to meet the goals”.
Full disclosure
The panel turned to the Isle of Man’s conduct of business rules, which will make it mandatory for life companies based on the island to disclose commission worldwide.
Jopp said: “At Zurich, we support it. More transparency, clarity and information for customers can only be good for the industry. Overall, it is good for us all to be able to say we have a business that is domiciled in this jurisdiction and it is properly regulated.”
Pain, whose business is licensed and regulated by the Cayman Islands Monetary Authority, added: “At the moment, the spotlight is on the Isle of Man because it is going faster than the other jurisdictions. The regulator in the Cayman Islands is talking to us about the same things: increased due diligence and transparency. It has not got as far as commission disclosure but it is just round the corner.”
For Kneeshaw, the code of conduct is also good for advisers. “Not only will good advisers adapt, they are already beginning to. They know this is coming. A number of the bigger advisory firms will not mind it at all. Just as initial and indemnity commission is a capital strain on an insurance company, it is a drug for advisory firms.
“The issue will be the transition, not the end result. The big firms would love to move to an annual management charge (AMC) or hybrid model, but the transition is difficult, so nobody wants to be the first to make the jump. There are plenty of small firms, though, starting new and setting up an AMC-only basis.”
Kneeshaw expects the transition to greater transparency to take about two years, and while the industry is not in a position to do it today, it is “ready to start the process of getting ready”.
