Royal London pledges adviser support around consumer duty

Speaking to FTAdviser today (March 8) Barry O'Dwyer, group chief executive, said the mutual was focusing on becoming a consumer duty champion and helping advisers and brokers do the same.

Partly this will be through a programme of activity, such as training, but also through a series of technological developments the mutual has been creating to support advisers.

He said: “A lot of this is around the technology we will provide to advisers to help them understand how their clients with Royal London are behaving.

“For example, we have developed technology to help show them what patterns people are showing in drawdown; are they drawing down too much and putting their future income at risk? The technology can flag this and enable advisers to step in and have conversations with them about that.

“It can be difficult for advisers to get that sort of data from providers."

Royal London is also developing lead generation technology for advisers to help them understand which customers within workplace pensions may need help and advice. 

We want to give whole-of-market IFAs a competitive edge.Barry O'Dwyer, Royal London

O'Dwyer said this technology had already been soft-launched, adding: “We are progressively rolling this out. We have started speaking to some advisers about it but will be rolled out more widely by July. 

"More widely, we are putting in place a programme of activity to help advisers understand how they might need to change their business to cope with consumer duty. There is a huge educational piece needed."

The mutual is also focusing on developing Wealth Wizards, which it bought in 2021, to help IFAs digitise their business.

O'Dwyer said: "As the world becomes digital and the IFAs face bigger and bigger competitors - banks or vertically integrated firms - we want to give whole-of-market IFAs a competitive edge. 

"If we can help them digitise and scale their business, we can empower them to take on bigger and new competitors."

Royal London is already starting to have conversations with IFAs as to how to use that capability more widely, scale their business and meet consumer duty obligations.

Kevin Parry, chairman, commented: "This year will see the introduction of the FCA’s new consumer duty which aims to deliver higher standards of care across  the industry.

"Royal London will fulfil the requirements of the duty when it is brought in and our programme of work is well underway."

O'Dwyer added another key focus for 2023 will be the enhancement of technology to support Royal London Asset Management's plans to broaden asset classes while extending our international  footprint. 

He said: "We have grown the size of RLAM considerably and are and investing heavily in the tech and infrastructure RLAM runs on to enable us to launch more funds and more asset classes over 2023, and we are currently building the human capability to support that."

Results

His comments came as the company issued its results today (March 8), which showed muted year-on-year net inflows for 2022 compared with 2021, but a significant rise in operating profit.

Parry pointed to developments made in 2022 to help enhance tech and service to advisers, such as: 

• A free service for Workplace Pension members to assess their financial wellbeing and build awareness of financial resilience for them and their families.
• Enhanced support for protection advisers through a new online dashboard providing proactive case management
• Migrated 4.3mn long-standing policies onto new technology.

The mutual reported an overall positive set of results for much of the business, compared with August last year when market movements had hammered fund values. 

Its results attributed the growth and 58 per cent rise in operating profit partly to an improved market but mostly to its cost-cutting drive across 2022, during which the mutual consolidated a range of legacy life funds, streamlined its operations and stopped offering over-50s life insurance to new customers. 

Net inflows remained positive at £3.71bn, despite the ravages of 2022. While this was still a drop on 2021's figure of £5.28bn, the mutual acknowledged it had suffered as a result of having cash outflows from some institutional clients with leveraged LDI portfolios managed by other institutions.

We were caught in the cross fire with the LDI situation.Barry O'Dwyer, Royal London

O'Dwyer said: “We still performed well in 2022. We don’t run LDI portfolios ourself but we look after bonds and cash for pension funds that have portfolios managed elsewhere.

"They drew down the cash and bonds to meet their obligations. We were caught in the cross-fire with the LDI situation: we are strong in fixed income, many schemes use us for that and in the days after the 'mini-budget' things came at everyone thick and fast. Schemes needed to liquidate quickly to get collateral."

Despite this, workplace pensions has been the "strongest product" for Royal London in 2022, he added.

Payouts

Overall, the mutual was still able to award discretionary payouts totalling £155mn to customers, compared with £169mn in 2021, citing the benefits of mutuality rather than having to pander to shareholders. 

Parry said: "Our aim is to invest continually in our business while awarding discretionary ProfitShare every year. We have again maintained our allocation rates awarding £155mn to eligible customers.

"Our continued strength means they are receiving ProfitShare for the seventh year in a row, demonstrating Royal London’s consistent approach.

“We also believe our role and responsibilities extend to supporting wider-society and in 2022, charitable and social impact initiatives benefited from over £2m in donations and support, the equivalent of 1 per cent of our operating profit."

Financials at-a-glance: 

• Operating profit before tax increased by 58 per cent to £210mn as the adverse market impacts on asset management revenues were more than offset by the benefits from a continuing focus on cost control, growing the annuity portfolio, and consolidating and simplifying closed funds.
• Transfer from the fund for future appropriations was £162mn (2021: transfer to FFA £79mn).
• Life and pensions new business sales up 12 per cent at £10.7nb (2021: £9,58bn).
• Net inflows remained positive at £3.7bn (2021: £5.28bn).
• AUM decreased to £147bn (2021: £164bn).
• Capital position: Investor View capital cover is at 213 per cent (2021: 216 per cent) and the Regulatory View capital cover ratio has risen to 206 per cent, compared with 173 per cent for 2021.

Background

In August last year, the life and pensions giant posted a pre-tax loss of £228mn for the first half of the year, which the company said had been caused by falls in equity and bond market that led to negative economic variances, compared to the expected return assumptions for assets supporting its life funds.

On December 31 last year, Royal London consolidated its legacy Royal Liver Sub Fund and Phoenix Life Assurance Sub-Fund into the Royal London Open with-profits funds, after approval from the High Court. 

This followed the consolidation of three other closed with profits funds into the Royal London Open Fund last year. 

O’Dwyer, added: “In 2022 we concluded our programme to simplify our business. As a direct result, Royal London has been able to increase the value of our long-standing customers’ policies by £675m in total through the consolidation of closed with-profits funds.

"We have also successfully modernised many elements of our business, introducing more efficient digital services for over 4mn customers whose policies have been moved onto enhanced systems."

simoney.kyriakou@ft.com