Advice network Openwork has been left “vulnerable” after Zurich confirmed plans to sell-off its remaining 25 per cent stake in the business, experts say.
Openwork is 67.5 per cent owned by member firms and 7.5 per cent by an Openwork employees trust, with the remainder held by Zurich, and now set to be divested to member firms over four years.
Mortgage Strategy’s sister title, Money Marketing, first revealed the insurer was planning an exit back in July, when Zurich brought in banking advice firm Evercore to review the holding.
But industry experts say without Zurich’s backing Openwork could struggle.
While the firm declared profits of £4.2m for 2014, and £183,000 and £2m in the previous two years, between 2009 and 2011 Openwork lost almost £21m.
Threesixty managing director Phil Young, a provider of support services, says: “Openwork is going to be a lot less secure than they were beforehand with Zurich’s support. The reputational association they had with Openwork meant the insurer was always going to be willing to lend a hand.
“If you look at the financial results over the years, there’s some big losses in there. So this could be ‘squeaky bum time’.”
Tenet group brands director and managing director of TenetConnect and TenetSelect Mike O’Brien adds: “You are always going to be more vulnerable as a standalone business without a parent who can step in and put more money behind you.
“So by definition they are more vulnerable, but that said, they now seem to be declaring profits, so maybe their problems are behind them.”
A Zurich spokesman says the move to divest was taken, in part, because of the firm’s recently improved performance.
He says: “It has always been Zurich’s intention to divest our shareholding in Openwork when the time is right, and this announcement reflects the huge strides the network has made in recent years to become and remain profitable.
“The bonds between the two businesses remain very strong, and while we will by 2020 no longer be a shareholder as a result of this agreement, we will continue to provide our market-leading platform and protection propositions to Openwork’s advisers and their clients.”
Openwork declined to comment.
I find it disappointing to read such a negative comment. Clearly the ‘industry experts’ are using the Zurich situation as a points scoring exercise to promote their own networks as a recruitment opportunity. Openwork has come a very long way and now with a very strong and capable executive team we are seeing strong results. They have recently secured Just Mortgages which clearly demonstrates they have a compelling proposition and furthermore have not been hit with regularity fines where other networks have. Over the next few years with the network to be mostly owned by the ARs I suspect those who write this negatives comments wish they were in such an enviable position. Sour grapes, me thinks!