Barometer points to dominating themes in 2007

The latest Sentiment Survey inevitably threw up some of the longstanding issues that continue to make life interesting for brokers but it also offered some indicators as to how the big themes will play out this year. The consolidation race, as covered in the lead news story, will produce more disappointment for those with large cheque books this year as consolidators, venture capital and private equity houses, insurers and money from overseas are all vying for their slice of the diminishing UK provincial distribution cake. Capital remains cheap and, with no shortage of suppliers looking for acquisition vehicles or to do the job themselves, the cultural fit with these deals will become ever more important. The fact that a £2m gross written premium book of business can produce an eight-way punch up among bidders signals to sellers that this is a sellers market. All the money sloshing about also signifies to those looking to exit that they can, in many cases, be picky and sell based on quality of fit and the best all-round deal not just price, which draws some amusing parallels I will leave to your imaginations.

One of those inevitable issues mentioned in the survey was regulation. While comparisons with the post-Financial Services Authority independent financial adviser market are generally resisted, it remains the closest parallel brokers have. One effect regulation and even hard disclosure had was that it made IFA's think long and hard about what they actually did for the customer. It also made them look harder at their operating models and, yes, in that market hard disclosure also had the effect of lowered commission levels. However IFA's got creative - charging a fee for advice and commission for the transaction - which had the effect of strengthening the advice offering after much soul searching and by being quantified in monetary terms by a tariff. Ultimately, regulation only killed off the bad IFAs and many would probably agree there is a direct correlation between the health and wealth of those remaining IFA's and the importance they have attached to regulation. Although the general insurance broker is now being wrought by the same process the fact that the Insurance Mediation Directive's authors hail the UK as leading the way surely illustrates that all the aggravation, bureaucratic overkill and hard work is a side effect of remaining a world class professional industry.