August 2007

Bright future ahead

What are Standard Life's main areas of focus going to be over the next twelve months?

We want to continue doing more of what we have been doing. We are very pleased with our business volumes and the kind of business we are writing. The SIPP business is going from strength to strength and has a great future ahead if it. The other theme starting to emerge is wraps. It's still early days but there is an increasing amount of interest in the marketplace for that kind of product and we are starting to get some reasonable traction with our business there.

How do you see the UK retirement market developing in the next few years?

I think we will continue to see considerable change and people can be optimistic or pessimistic about it. The Retail Distribution Review has arrived and there will be much discussion over the next six months and change will come about off the back of that. There isn't a lot of specific detail available yet but I think the direction we are heading in is very positive. We are heading to a land where there will be increasing demand for high quality advice and service going forward and secondly I think the structures we are building will encourage more professionalism. This in turn will help improve the reputation of our industry.

What impact will third way products have on the market?

I think the concept is a brilliant one. It's a great opportunity to meet a real need that is out there - to offer guarantees while retaining investment freedom and we've seen these products become very popular in other countries. I think we are well placed to move into that space with the strong SIPP business that we have and that's what we plan to do next year.

I do think though that it will take some time before the market fully understands these products but then it was a similar scenario with SIPPs. They were around for many years but only really came into their own at A-Day. These third way products have a great future but it will take some time to build.

What are the key challenges being faced by the industry?

More advisers are realising that it makes long term sense to derive real long term value from their businesses. That means moving away over a period of time from high upfront charges towards charging on an ongoing basis and a model based on accumulating funds under management. I know through my own personal experience in Australia that once advisers have this idea then they will get very excited about it and make real fundamental changes in their practices. That's a big challenge - some advisers find the concept is of no interest to them but others will see it as an opportunity to build real sustainable value and increase the valuation of their businesses. It's no trivial thing to change your business model but increasingly advisers will look to do this. I've seen the impact on both the customer and adviser in the past and it is overwhelmingly positive. That's not to take away from the good work that advisers do under the existing regime but this is a model that I think has real advantages for everyone involved.

The explosion in SIPP business post A-Day has led to some concerns that providers and advisers are struggling to maintain a high level of service to customers. How is Standard Life dealing with this issue?

I believe that our track record speaks for itself. We went from having virtually nothing at the end of 2004 up to £5.3bn of funds under administration by the end of the first quarter of 2007. That's strong growth - stronger than we initially expected and so we had to work hard to martial resources and train people to cope with SIPP business. I feel that we have managed this well in terms of the reputation we have maintained and the awards we continue to win. This doesn't mean that we are complacent; we continue to track our business very carefully and we continue to grow our expertise. We also continue to invest money into the technology involved and we recently approved additional funding to increase the functionality of the SIPP business.

This business is not one where you develop the product or service, throw it into the market and then leave it there. It's very much more a business where you set up a framework and then you learn from it and you continue to evolve and adapt. We've got to a point now where we've got a good volume of business and it makes sense to continue to invest and improve our proposition. When we ask advisers what is most important to them then of course fund choice is important as are charges but more and more are telling us that the quality of the service and responsiveness when things go wrong is what they value. We are talking about large sums of money and advisers need providers to respond quickly and intelligently to anything that might go wrong.

Wraps have been slow to take off in the UK. However, with increased levels of SIPP business will the situation change?

Half of our wrap business is SIPP so we see the wrap as a natural extension from the SIPP work we've done in the past. It's an easy journey for advisers to take. A lot of advisers are well trained on pensions so easily cross the bridge to SIPP so it won't be too difficult for them to move a little further down the road towards wraps. I think there will be some who will never want to move in that direction and that is perfectly fine - there's nothing wrong with that. They've got a good business and are happy in what they are doing but there are definitely more people looking at wrap. Some will naturally convert to wrap and good luck to them, some will never convert and good luck to them but the new model is strong and it will grow of its own accord. We are already seeing it as new people come into the business and go straight into the platform way of business.

Trevor Matthews
Chief Executive
Standard Life Assurance