Following the high profile exit of the mass advice market by the banks, L&G said it felt the ‘building society movement’ was the best way to access customers on the high street.
It has 20 building society partnerships, which range in size and scope and give L&G access to over 85% of total UK building society assets.
This figure includes its strategic partnership with Nationwide, which employs its own advisers but sends approximately 90% of its business L&G’s way, it added.
The strategy L&G has come up with was three years in the making, according to Chris Last, banks and building societies managing director at the company.
He said with the current proposition he could not envisage the number of L&G-employed advisers growing much bigger, but this could change if one of the high street banks came back round to providing mass market advice and decided to do it in a partnership.
Opportunities ahead
“If a large bank came to us and said ‘we have changed our mind, we would rather start running a professional sales force’, if the right opportunity existed I would take on 400 to 500 advisers for the right arrangement.
“We deal with banks anyway because of product arrangements and have relationships with all of the major banks. If they decide to come back and partner with someone we are ideally placed.”
Last said that Aviva and Axa have tried to offer similar partnerships to building societies, but L&G had managed to strike a chord with its offering.
Indeed Leeds Building Society has switched from an arrangement with Aviva to using L&G.
The charging structure of the advice provided depends on the building society in question, but the advice is restricted as only L&G products are discussed.
Unless a customer takes out a product they are not charged for the advice, which Paul Kaye, general manager of sales at Leeds Building Society, said was crucial for members.
He said Leeds had undergone extensive customer research to find out which method of payment its customers preferred and the vast majority did not want to pay upfront for the service.
Fees and charges
The initial advice fee ranges between 3% and 3.5%, with an ongoing charge of 0.65% each year. Fund charges differ depending on the strategy and asset class and a platform fee may also be charged.
This translates to an average ongoing charge of between 1.10% and 2% dependent on the products selected.
Last concluded: “We have been advising customers under RDR rules for six weeks and have seen over 1,500 people in branches across the UK. The business levels we are seeing on the back of these appointments show no change from pre-RDR levels.”
L&G has sole tie distribution partnerships with Yorkshire, Leeds, Dudley, Tipton & Coseley, Cambridge and Leek building Societies, among others including Virgin Money (which was Northern Rock).
