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Where did it all go wrong for Standard Life Aberdeen?

Where did it all go wrong for Standard Life Aberdeen?
 Martin Gilbert of Aberdeen Asset Management and Keith Skeoch of Standard Life

The news that Standard Life Aberdeen is to rebrand as Abrdn marks a new beginning for a company that has struggled since it arose from the merger of two bastions of the financial services world. 

The combined group was a sprawling entity, with operations ranging from Aberdeen’s substantial Asian equity operations – still run by one of the company’s co-founders Hugh Young – to atrio of adviser platforms and the 1825 adviser business.

The shares of the combined group are about 30 per cent lower now than when the combination was announced in 2017.

The company initially operated with joint chief executives Martin Gilbert from the Aberdeen side and Keith Skeoch from Standard Life. Both have since departed the business. 

Gilbert had been one of the co-founders of Aberdeen Asset Management, and was very much the public face of the company. 

James Sullivan, head of partnerships at Tyndall, had been a shareholder in Aberdeen but sold out when it became clear that Gilbert would not be the dominant figure in the combined company. 

He says Gilbert was granted “artistic licence” to operate the way he did at Aberdeen because of his ability, and this added value for shareholders, but with Gilbert sharing the chief executive role, it was no longer the case that he would be able to operate as he had in the past, something that Sullivan says was detrimental to shareholders and so he sold his holding.  

The stark underperformance of the share price since the merger happened is about more than personalities, however. The early years of the combined company saw it focus on its asset management arm - but it is this part of the business that has done most the damage. The firm's 2020 accounts show net outflows of £29bn, with adjusted pre-tax profits down 17 per cent to £487m.

Those outflows included more than £25bn fromthe loss of a long-standing mandate that had been held by Aberdeen to manage for Scottish Widows, but which was later removed due to Scottish Widows' objections to the merger. 

Stripping out the impact of the Lloyds withdrawal, net outflows were £3.1bn in 2020, compared with £17.4bn in the previous year. 

Redemptions may be slowing at last, but the company's new management is increasing the focus on other parts of the business.

In its presentation to analysts on its results day in March, SLA listed weaknesses that included being "underweight wholesale distribution", as well as having "undervalued" platform and advice arms. It is now seeking to do more with those parts of the company.

SLA said it was unable to comment for this article in advance of the company AGM later this month.

'Historic reliance' became hindrance 

But what went wrong with the asset management arm? From advisers' perspective, the company's MyFolio multi-asset range has proved a popular way of managing client money. But this has not always been the business' main emphasis. Another weakness highlighted by the company's analyst presentation was a "historic reliance on 'hero' funds".