Jason Hollands, managing director at Tilney Group, said the news that FTSE 100 life assurance giant Prudential is to merge its Prudential UK & Europe and M&G savings and investments businesses to become “M&G Prudential” brings an end to its longstanding strategy.
Both brand and operational ring-fencing for its respected asset management arm M&G Investments has been a core part of Prudential's strategy – so Mr Hollands said the move to merge the two is undoubtedly a big step that will raise eyebrows both among financial advisers and the City.
He said: "The stated rationale behind the move is that the scale of the restructured business which will look after £322bn will create 'better outcomes for our millions of customers' by bringing Prudential’s capabilities in areas like liability driven investing and volatility management alongside M&G’s active investment approach.
"There is good logic to this given the growth in defined contribution pensions and increased popularity of drawdown creates new product development opportunities.
"But a key tangible benefit appears to be for the Pru’s shareholders with estimated major recurring annualised cost synergies achieved of £145m by 2022.
"That’s pretty punchy stuff, the details of which are not clear at the moment but might imply big savings in centralised functions and distribution."
With the near complete merger of Standard Life and asset management giant Aberdeen and the earlier deal combining Janus and Henderson, the bringing together of Prudential and M&G is the latest evidence of the tectonic plates shifting among providers.
Mr Hollands said: "The market is developing towards the creation of a small cluster of super-groups that have both broad manufacturing capabilities across asset classes and significant distribution.”
The combined business will have assets of £332bn and six million customers.
A focus of the combined business will be to use the pan-European distribution network of M&G to sell more of products such as Prufunds.
The announcement of the tie-up came as part of Prudential’s results, which were published this morning (10 August) and showed increased inflows into both businesses.
The company stated they intend to develop “new digital solutions” as part of the combined group for the 19,000 IFAs they assist in the UK.
Patrick Connolly, chartered financial planner at Chase De Vere, said if the merger is managed well it shouldn’t impact negatively on investors.