Lloyds Banking Group and Schroders have struck a deal that will see them become joint-owners of a new financial planning company.
The involvement of banks in the UK financial planning space has been limited since they moved away from their traditional position of having in-branch staff offering products to customers.
But that is something that seems to be changing.
Industry impact
The strategic partnership will combine Schroders’ investment and wealth management expertise with Lloyds’ significant client base and multi-channel distribution and digital capabilities.
The intention is that the, as-yet-unnamed, financial planning business will become one of the top three in the UK within just five years. It will launch by mid-2019.
The intended size and scale of the business would see it rival industry players such as St James’s Place and Standard Life’s 1825.
Its introduction to the market could have significant have repercussions for the availability and cost of advice.
A spokesperson from St James’s Place was unable to comment on the Lloyds and Schroders joint venture but told International Adviser: “Any new entrant into the market supports our belief that there is a significant advice gap in the UK. A growing market combined with fewer advisers, low interest rates, tax complexity and pensions freedoms means that there has never been more demand for advice than today.
“With the strength and depth of our technical resources and the Partnership, St. James’s Place is well-placed to address this.”
The chief executive of Intrinsic, Andy Thompson, told IA: “Given we have a vast advice gap in the UK, banks re-entering the market should not be seen as a threat.
“Research has shown that those who take advice are likely to continue to take advice in future, so I believe a rising tide can lift all ships.”
IA reached out to Schroders to request more details about the joint venture, but the company advised it was providing no further information at this stage.
What we know
Lloyds will own 50.1% of the share capital of the financial planning business, with Schroders holding the remaining 49.9%.
Schroders co-head of UK intermediary James Rainbow and Scottish Widows chief executive Antonio Lorenzo are set to become the respective chief executive and chairman of the new financial planning business, subject to regulatory approval.
As part of the deal. Lloyds will transfer £13bn ($16.9bn, €14.7bn) to the new business and receive a 20% stake in Schroders’ UK wealth management business Cazenove Capital.
In addition, and as widely predicted, Schroders has snagged the remaining £80bn Scottish Widows contract.
