Acquisitions in the financial services sector have become far from unusual. But a deal that caught the attention of both the consumer and trade press is Lloyds’ planned acquisition of the Embark Group.
The banking giant has announced that it intends to acquire Embark for around £390m. The figure is a fraction of around £10bn of assets under administration (AUA) that Lloyds says its customers invest with third parties each year, which it wants to retain more of, while aiming to meet more of its customers’ “broader financial needs”.
Lloyds says its existing partnerships already meet the financial planning and investment requirements of mass affluent and high-net-worth customers via Schroders Personal Wealth and Cazenove Capital.
But the group says the acquisition of Embark – which operates white label services to markets including wealth management, direct-to-consumer and robo-advice – will deliver a mass market, D2C proposition, as it targets a top three position in the self-directed, robo-advice market.
“We think that more than £10bn of assets under management every year leave our Lloyds customer base to go and be managed by other providers. There is no reason why that should be the case,” says interim group chief executive William Chalmers.
“We should be able to offer a compelling proposition to our savers going forward across our entire customer base. And indeed, that is what Embark is going to allow us to do.”
The deal, which is expected to complete in the final quarter of this year, will see Lloyds acquire Embark Group and its subsidiary brands, which include Embark Pensions, Embark Platform, Advance by Embark, Horizon by Embark, Stocktrade, The Adviser Centre and Vested.
Through the transaction, Lloyds will acquire around £35bn of AUA, on behalf of approximately 410,000 consumer clients.
The sale, however, excludes the Rowanmoor Sipp and Ssas administration business, which is being retained by existing shareholders, and represents around £5bn of AUA on behalf of around 15,000 consumer clients.
The future for Embark
After having made its own acquisitions, such as that of Zurich’s investment and retail platform, Embark will become a wholly owned subsidiary of Scottish Widows.
An Embark spokesperson states “nothing changes for advisers or customers today”, and that it will continue to operate as a separate brand and business line as part of Lloyds’ multi-brand portfolio.
The banking group likewise tells FTAdviser that Embark will “co-exist” with Scottish Widows, and that both businesses will “continue to engage with the segments of the market in which they currently operate”.
Embark says its focus will be on helping Lloyds to deliver an improved retirement proposition for the intermediary sector, as well as continuing to grow the Embark business.
“The benefits of this deal will mean Embark can continue to invest in its digital development, client experience and enhance its pricing in a competitive market, as we continue to progressively improve our proposition for all our partners, especially advisers, over time,” the spokesperson adds.
Meanwhile, Lloyds says Scottish Widows will leverage Embark’s platform and product capability to digitise its Retirement Account product and improve how it works with advisers.
“Advisers will also benefit from smoother sales and onboarding of new clients while being able to manage existing clients’ needs more efficiently,” it adds.
Will Roberts, editorial director at CoreData Research (which highly commended Embark in the overall best platform and best large platform categories in its 2020 UK investment platform study), says the adviser community will have to "wait and see" what impact the deal has for advisers.
He adds: “As advisers conduct more business through platforms, the service element has emerged as a key differentiator.
“So if the deal results in an enhanced platform service offering at a competitive price then it will be a win for advisers.
“It will also be important to provide as smooth a transition as possible for those adviser clients who have only recently moved from Alliance Trust Savings and Zurich.”
Andrew Ashwood, a senior analyst at research consultancy Platforum, predicts that users of the Advance by Embark platform probably will not see any real change under new ownership, with a scheduled migration onto the same back-end system as the Embark Platform.
Given Embark’s acquisition of the Zurich retail investment platform last year, Ashwood adds: “What might concern advisers more is partnering with a platform that has undergone two changes of ownership in as many years.”
Rowanmoor breaks away
Rowanmoor's Sipp and Ssas administration business, the part of Embark that is being retained by existing shareholders, will become a standalone business.
An Embark spokesperson says: “Embark management and a number of shareholders have decided to retain the business, with Paul Downing continuing to lead Rowanmoor as chief executive, supported by chair David Barral and Phil Smith as non-executive director.
“It is business as usual for Rowanmoor clients, only it will be operating as a standalone business, rather than part of a wider group and therefore this will create a number of new roles and opportunities for employees within the business.
“As a leading Ssas administration business and bespoke Sipp and group pension trust provider, supported by deep expertise in actuarial and property management services, it will continue to work closely with its existing SME, financial adviser clients and their customers.”
For John Moret, principal at consultancy MoretoSipps, the news that Lloyds will not be acquiring Rowanmoor does not come as a surprise.
“It is well known that the Sipp business has hundreds of Sipps with impaired investments, including Cape Verde,” Moret says.
Last year the Financial Ombudsman Service said it had received 400 complaints relating to Sipp due diligence involving Cape Verde-based property scheme The Resort Group. The ombudsman said the "vast majority" of these were against Rowanmoor.
An Embark spokesperson says: “Rowanmoor strongly believes it did everything right as a Sipp provider at the relevant time, and the outcome of any claims against Rowanmoor is yet to be determined by Fos. Rowanmoor has not had any adjudication against it and continues to focus on delivering for its clients and their customers.”
WestBridge Ssas director Nathan Bridgeman, who was formerly managing director of group distribution at Rowanmoor, likewise says the splitting out of the Rowanmoor business is not a surprise.
“The bespoke nature of the pure administration business hasn’t fitted with Embark’s drive towards technologically driven assets under administration for some time,” Bridgeman adds.
Chloe Cheung is a features writer at FTAdviser
