LV: ‘We didn’t need to build our own platform’

Clive Bolton, who said he grew Aviva’s adviser platform from less than a billion to around £20bn, told FTAdviser that the £100mn LV said it needed for ‘IT investment’ two years ago was based on the assumption LV would launch its own platform.

He said it had been a consideration as part of an overall tech upgrade at the mutual. For example, he said that, when he joined LV in 2019, customers could not even look at their investments online - they had to phone in. 

“LV was significantly behind the pace there, even though the franchise was very strong,” Bolton explained.

Upon coming in, it was Bolton’s job to begin the “recovery process” following a major demerger with its general insurance business, which it sold between 2017 and 2019.

We didn’t want a platform for the sake of owning it.Bolton

Called ‘fix, grow, transform’, the turnaround project saw Bolton take stock of the mutual’s then-IT infrastructure.

“When I joined, the organisation was looking to become a platform provider,” said Bolton. Having built a platform practically from scratch, he knew the time and money building one at LV would take. 

“I know that well. It requires an awful lot of money to do that.” The mutual was also mulling the option to buy a platform at the time, though this would also have been costly. Last year, James Hay paid £145m - more than LV’s entire IT budget - for Nucleus.

But when Bolton took a closer look, he wasn’t convinced this was the route LV needed to go, considering the platform market was already “well-served”.

“We didn't need a platform,” said Bolton. “What we needed to do was distribute our funds in a platform environment to enable advisers to buy them. We didn’t want a platform for the sake of owning it.”

Last week, LV announced its partnership with Embark. It will see advisers and their clients who use LV gain access to Embark’s retirement-focused platform via an LV-branded service.

Crucial to this partnership is LV’s Smoothed Managed Funds range, which Bolton suggested were - and will continue to be - key to LV’s turnaround.

Without going into the commercials of the deal, Bolton said the Embark deal doesn’t require as much upfront investment from the mutual and allows it to be more targeted with its spend.

Now three years into its transformation programme, LV is starting to reap the rewards of its fund-focused strategy. 

Between 2017 and 2020, LV’s with-profit membership base had dropped by more than 40 per cent. These members have access to LV’s fund surplus via a mutual bonus, whereas non-profit members - e.g. protection customers - have voting rights but no access to LV’s profits.

We see ourselves as a competitor of PruFund.Clive Bolton

The issue a few years ago, Bolton explained, was that LV’s old endowment policies were maturing and the mutual was not selling enough with-profit funds to replace those.

In April 2021, LV launched its latest version of smooth managed funds. While the mutual had been managing these types of funds since 2012, it was this latest fund which helped it restart growth.

“Now with-profit funds are growing again, so they’re a better long-term investment,” Bolton explained.

Back in 2020, LV had projected a further 60 per cent fall in member numbers over the next 10 years due to slow growth.

The smoothed funds range, which is one of LV’s with-profit funds, doubled its inflows last year and currently offers levels of risk rated at 3, 4 and 5.

Like Prudential’s PruFund, LV’s smoothed funds range is designed to ride out volatility - making it particularly popular during a global pandemic.

“We see ourselves as a competitor of PruFund,” said Bolton. “We’re seeing an increasing view taken by advisers to call it [smoothed funds] an investment category.”

The technology and IT development our end which enables us to partner with Embark will work with others. So watch this space.Clive Bolton

This year, LV has plans to launch an extra cautious version of the fund risk rated 2, and an impact growth version risk rated 6 with a greater focus on ESG.

It also intends to include a range of modelled portfolios through its LV-branded, Embark-linked service built around these smoothed funds, and focussed on the transition to retirement and drawdown.

Since announcing the Embark deal, Bolton said LV has received a number of enquiries from other platforms - some proprietary and some integrated into other offerings - asking to discuss distribution opportunities.

“The answer is yes. The technology and IT development our end which enables us to partner with Embark will work with others. So watch this space.”

ruby.hinchliffe@ft.com