Axa Wealth International unveiled an offshore sales and distribution division in August. Why did the company restructure itself in this way?
To some extent, it reflects the diverging interests of the Axa group companies in the UK. Having observed the way in which offshore life companies across the industry structure their sales, a shared sales force is certainly the most effective and most efficient way to move, where the onshore company is promoting a basic investment proposition that is closely-aligned in principle with the offshore proposition.
But last year – before I came in – it was recognised that the interests of Axa Wealth in the UK were not as closely-aligned at a sales level as they had been in the past.
So it was decided that the offshore company – which regularly contributes 30% of the premium income to the Axa group of UK life companies – should have its own sales force and proposition marketing function. That has played out this year.
Mike Foy, the managing director of Axa Wealth International, said the new division was essential, given changes anticipated under the Retail Distribution Review (RDR). In what ways do you expect RDR to affect the UK offshore bond market?
The RDR has been a monster – it has taken up huge amounts of resource, across all companies. But it could enhance the prospects of the offshore bond market. You have to consider a typical IFA’s business at the moment, and that they will potentially advise on a whole range of products – from ISAs through to offshore bonds. What will become clear to advisers post-RDR, if it is not already evident, is that the offshore bond customer is the most valuable customer.
There has been a lot of speculation about whether IFAs will want to service ISA-type business, and whether one of the effects of RDR will be to take people out of the advice net. What the RDR will do is focus the attention of IFAs on wealthier customers, and those that are more willing to pay fees. In that regard, there is a close match with the type of business that Axa Wealth International writes.
Firms could become more active in the offshore bond market, because of the tax management properties of offshore bonds. If you can demonstrate that you are able to save clients tax, it will be an awful lot easier to justify fees in the new environment. So the underlying prospects are quite good for this sector. A real unknown at the moment – and I do not know anyone who can make a call on this – is what the reaction will be immediately after the change takes place.
Axa Wealth International’s sales fell 37% in the first six months of 2012, year-on-year. What were the reasons for this decline?
They are not any different to the more general reasons why clients are sitting on cash – in offshore bonds or anything else. We have tracked slightly ahead of where the market has gone. Certainly the last set of [Association of British Insurers] results, to the end of quarter three, still had Axa ahead of the UK offshore life companies.
Because of the net worth of the individuals involved, an offshore business that focuses on wealth management, and particularly estate planning, is a little more recession-proof than more retail-type financial services. But you cannot ignore what has gone on, and the general reasons why people are unwilling, or take a lot of persuading, to take affirmative action in relation to their investments.
I do not think there has been a busier time in the life insurance sector in the UK, in all of my 30 years in this business. The bizarre thing is that everyone is busy, but the business levels are not what they were. Generally, if you are busy, it is because business is coming in through the door. And if you are quiet, it is because the market is quiet. Again, everyone’s focus has been to ride the RDR tiger and, come the new year, we will all step back and look at what is there.
Do you have product development plans for 2013?
RDR will be with us for a while, because there is almost a second phase in quarter one, when all the non-essential stuff needs to be done. But this is the time of year when all sorts of financial organisations are putting their plans together for next year. The broad thrust of our plan is to take a long, hard look at the core propositions that have existed within this company for some time.
Evolution and Estate Planning Bond are still successful, and still win awards. Estate Planning Bond must be the biggest-selling individual product in this sector.
We will do a thorough assessment in quarter one of what is on the market – to identify a number of additional features we may wish to build into re-launched, enhanced versions of those core products. In quarter two, we plan to take those fledgling propositions and features into the market, to test with a range of distributors.
So the priority next year is to look after the products and the propositions that have served this company well, for a period of over 12 years. But from the half-year point next year, we will start looking at new propositions, which could come to market towards the end of quarter one, 2014.
Are you interested in targeting new markets – either geographically, or in terms of client type?
Geographically, you can never say never, and it is a question I have been asked a lot since I have been here. It seems glamorous to be in 143 different markets. But I can tell you after 11 years of consulting, trying to help people who have got themselves into a pickle in Equatorial Guinea, it is not. One of the things that attracted me to this company was its single market focus.[image_library_tag 4304fb87-b35f-4c3d-9dd0-b54a0059d194 250×276 ?width=250&height=276″ style=”width: 250px; height: 276px; border-width: 10px; border-style: solid; border-color: rgb(255, 255, 255); float: right;” alt=”” ]
Axa is a huge group and it has domestic life insurance subsidiaries in most of the main markets of the world. So the rationale for having a cross-border company going into multiple markets does not stack up.
Whether we will target different customers is a good question. Because a lot of this company’s business is in the broad category of estate planning and wealth transfer. Across the piece, the average age of a policyholder is between 55 and 60. And for Estate Planning Bond – the core proposition – it is probably late 60s to slightly over 70. So we could do with a few younger folk. And in the fullness of time, as we develop new propositions, that will begin to change.
But the type of clients we have reflects the propositions we have, and the ages at which people take financial advice – sorting out how to organise their inter-generational wealth transfer.
Those people tend to be a lot older than any of us, and we have to be mindful of that in the way we communicate with them.
I have any number of people on the phone telling me of whizzo marketing techniques for the internet age. And then I tell them what the average age of our policyholder is, and that those things are not appropriate.
If we want to change that, we can do. But that is for the future.
How can Axa encourage estate planning at an earlier age?
I am working on something at the moment. Again, it is back to the original point about RDR. In a fee-based environment, estate planning becomes more attractive for the advisory community. Because, if you want to charge a fee, you need to justify a level that is commercially-viable. And surely it is easier to justify that fee if you are able to demonstrate to your clients the considerable inheritance tax bill you are saving them, by structuring their arrangements in a particular way.
A couple of banks are interested in getting into this. Banks have traditionally focused on wealth accumulation – savings and wealth management. They never really got into estate planning in a big way. Now they see how difficult it is going to be, to justify fees in future. [Banks] are saying: ‘You know all that wealth transfer stuff we were not really listening to before – we would like to learn more about it now’. They have got the clients, and they are the ones with the money.
So yes, the incentive for advisers to bring wealth transfer propositions to younger ages, is going to be more in their face. I guess it would take the market-leading company in the sector – that is us – to give it a good shove and make it happen.
Looking ahead, what do you see as the priorities for investors?
A message that came out of the [International Adviser] International Fund Links Forum in September was that inflation is hard-wired into the system, as a result of quantitative easing. Inflation will work its way out. When? We do not know. But if there is a recovery gathering, it could be the latter half of next year.
It is something we will consider in quarter one, as we look to enhance our core propositions. Income-producing and inflation-beating assets may become an important theme.
