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UK financial advice: will Sesame toast panel success?

22nd July 2005

The UK's leading IFA network Sesame has this week launched its multi-tie proposition after months of speculation over which providers will be included on its panel. While over time, the multi-tie approach to financial advice should catch on within the IFA community, Sesame's move may have come a bad time for the company ahead of its imminent sale.

Sesame's announcement revealed that five providers - AXA [AXA], Legal & General [LGEN.L], Norwich Union, Prudential, [PRU.L] and Standard Life - have been chosen to make up Sesame's "Sesame Select" multi-tie proposition.

Depolarization legislation came into effect at the beginning of June 2005. This allows advisers to offer customers products from a small range of providers as a "multi-tie" rather than being independent or "tied" to a single provider. Despite companies such as Sesame expressing support for the new regime, enthusiasm among individual IFAs has been limited. According to Datamonitor's quarterly survey of IFAs, only 1-2% of IFAs actually intend to move to a multi-tie proposition such as the one proposed by Sesame

Sesame has a network of over 8,150 financial advisers, and it is offering the panel to them as a means of reducing costs and saving time in the advice process. The end goal is to allow greater access to financial services products for lower-income individuals who could not afford to pay for full independent advice.

This change of business model comes at a crucial time for Sesame as it is due to be sold by its parent company Misys next year. Misys' annual results showed Sesame's turnover to be down by 5% from last year, therefore the success of this panel launch is crucial both to the sale and equally to Sesame's future profitability.

It is likely that the success of multi-tie will take time to manifest itself. IFAs are wary of losing their independence, and see their perceived independence as crucial to maintaining their relationships with customers. Under the multi-tie approach, clients may initially feel some of this has been diluted.

However, multi-tie will reduce the costs and improve the efficiency of many IFAs, so it is likely that as the concept becomes more familiar, more advisors will move in this direction. Yet this eventual movement may not come soon enough to ensure the success of Sesame's sale, and the company may find it fails to reap the expected dividends of the switch to multi-tie.

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