Money Marketing (31/10/2018) – Jury still out as venture tries to win over the hearts of advisers

One of the most closely watched soap operas in UK financial services this year peaked last month, when banking giant Lloyds revealed who will get to manage a mega £109bn mandate that was up for grabs.

Shortly after Lloyds announced that it had assigned BlackRock to oversee £30bn of the assets, it made another big call: Schroders will not just manage the other £80bn, but will enter into a new “strategic partnership” with the bank.

The companies will join forces to create a financial advice joint venture, which aims to put them among the “top three UK financial planning businesses within five years”.

Lloyds will own 50.1 per cent and Schroders 49.9 per cent of the JV, which is set to go live by the middle of next year.

The ambitious plans have raised eyebrows among advisers.

Both Lloyds and Schroders declined to provide us with any more details than what was in the announcement, saying it was too early to know further arrangements.

What details we do know from the stock exchange briefing, however, have led to a vigorous debate as to whether the firms are on course to create the next advice market superpower.

IFS Wealth and Pensions director Alan Chan says: “I definitely think it is a good idea for the bank. There are many people who certainly need basic advice, and banks are very well positioned for that.

“They have branches, they have the numbers of staff that will do that, but not for the wealthy; that market is really quite saturated.”

The companies’ announcement that they are seeking to “address the growing gap in the advice market” through the partnership certainly piqued the industry’s interest too.

The term “advice gap” is used to refer to people who cannot or will not pay for full regulated advice. 

Lloyds’ “high net worth customers”, who the companies are also looking to target with their JV, hardly fit the bill.

Chan says: “I wasn’t too convinced when they said that the whole point of that partnership was to close an advice gap for the wealthy. There certainly isn’t any advice gap for the wealthy, it is very well catered for by wealth managers and IFAs, so it baffled me, the reason behind it.”

The bank and asset manager combination could have the tools to help close the actual advice gap, however.

Chan says: “I think there is a space for banks to enter financial advice, because there are lots of underserved individuals who might need some basic financial advice, and obviously it is not commercially viable for IFAs or wealth managers to deal with them.”

Full article link: https://www.moneymarketing.co.uk/analysis/lloyds-and-schroders-advice-partnership/