Restricted adviser network Sesame would be broke and unable to trade without the continued financial support of its parent company Friends Life, Aviva has said in a note to shareholders ahead of its planned acquisition of the provider.
Aviva made clear it is not part of its strategy to provide the same "open-ended" financial support to Sesame.
"Unless the directors of Sesame are able to reach a solution that does not require continued reliance on the financial support of the Friends Life Group, or following completion of the Proposed Acquisition, the Enlarged Aviva Group, it is likely that the Sesame business will no longer be viable and will not be able to continue to trade,"the note said.
The damning appraisal puts the future of the 2,000 advisers who make up the largest advice network in the UK in doubt.
Aviva has already said it will cut 1,500 staff following its purchase of Friends Life.
Sesame made pre-tax losses of £19m for the financial year ended 31 December 2013, and Aviva said it understands that, in its current form, it is expected to continue to make losses in the future.
In addition the Sesame business has potential liabilities arising from claims relating to advice or services provided to retail customers by its appointed representatives. "The amount of such potential liabilities cannot currently be quantified," Aviva told its shareholders.
In February 2013, Friends Life began a strategic review of the Sesame Bankhall Group (SBG), including the Sesame network, to address what Aviva called "the financial uncertainty" of those businesses, and to examine whether steps could be taken to address the "structural issues" within the businesses so as to reduce or remove the need for financial support from Friends Life.
That strategic review is ongoing, but has to date resulted in Sesame moving to a restricted advice model and undertaking past business reviews, primarily an investigation into pension switching advice named Project Minerva, the details of which were revealed by COVER's sister title Professional Adviser last year.
Friends Life, SBG and Sesame are in discussions with the Financial Conduct Authority (FCA) about the strategic review, and what Aviva referred to in its shareholder note as "the various options under consideration" for Sesame's future.
"Certain of the options may only be capable of being implemented if they are supported by the FCA and there can be no certainty that such support will be obtained," the note said, without giving further details.
While the strategic review is ongoing, Sesame continues to rely on financial support from Friends Life, Aviva said.
In a stark warning to Aviva shareholders, the note added that the outcome of the Sesame review could hit the operation, financial condition, reputation and brand of Friends Life, and, post-aquisition, Aviva as well.
