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Banking on joint enterprise

Banking on joint enterprise

Lloyds is due to re-enter the financial advice market in 2019 through its joint financial planning business venture with Schroders, but industry participants are doubtful about how the partnership will work and what future role UK banks can play in providing financial advice. 

The joint venture participants hope it will becomes a ‘top three’ UK financial planning firm within the next five years. It aims to go live by end of the first half of 2019, subject to regulatory approval. But how is it expected to work? 


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Ian Woodhouse, head of strategy and change at consultancy Orbium, says the joint venture will enable Schroders to sell directly to clients and use Lloyds as its main, but not its sole distribution partner. 

Mr Woodhouse explains: “Lloyds will provide the retail clients, distribution and brands (both Lloyds and Scottish Widows) to address changing client needs, such as self-provision of retirement advice, next generation transfer, while Schroders will provide the industrialised asset management product and solution capability and performance across multiple asset classes and international markets.”

Bartosz Golba, head of wealth management research at GlobalData says: “Previously Schroders would sell the products to intermediaries; now they will be able to do it directly.”

For Lloyds, the partnership will “combine Schroders’ investment, wealth management and technology expertise with Lloyds’ significant client base, multi-channel distribution and digital capabilities”, both firms say. 

Affluent v high net worth

The joint venture partnership will establish two models, as under the terms of the deal Lloyds will transfer £13bn of assets to the joint venture and receive up to 19.9 per cent of financial investment in the holding company of Cazenove Capital, Schroders’ UK wealth management business. Cazenove focuses on high net worth clients.

In addition, Lloyds will also transfer approximately £400m of existing private client assets under management to Schroders’ UK wealth management business. 

But even though the joint venture says it is adopting a model for affluent customers and one for high net worth clients, experts are unclear what the target market will be. 

Martin Bamford, chartered financial planner and managing director of Informed Choice, says: “The joint venture appears to focus its advice delivery on high net worth banking customers, while customers who don’t meet this criteria will no doubt be offered a lesser service that will seek to funnel them into a restricted range of investment products,” he explains. 

Key Points

  • Lloyds and Schroders have formed a joint venture for a joint financial planning business
  • The move raises questions over who will be the target market
  • It also raises questions over whether banks should re-enter the advice market

Neil Moles, managing director of Progeny Group, says:  “It isn’t clear what sort of clientele this venture is looking to attract. ‘Affluent’ and ‘high net worth’ are subjective terms, but it will likely involve a mass market approach with low minimum investment amounts. Financial planning has become a catch-all term and it will be interesting to see what the JV’s proposition and charging structure looks likein practice.”

According to Mr Golba, the joint venture is more tailored to an affluent client because via Cazenove Capital, Schroders already has a strong institutional asset management capability, and holds stakes in Nutmeg and WeInvest, standalone robo-advice challengers.