LloydsMar 13 2019

Lloyds venture faces challenges

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Lloyds venture faces challenges

The joint venture was originally announced at the end of last year, when it was revealed that the two companies were joining forces to create a new financial planning arm, aimed at mining the perceived need for more financial advice among the mass affluent.

In February, it was revealed that the new company  would be called Schroders Personal Wealth, and would be targeting clients with investable assets of £100,000.

When it comes to recruiting a number of financial advisers, there are not as many as there used to be Stuart Duncan

It was also revealed in a newspaper article, although not confirmed, that Lloyds would be recruiting 700 financial advisers to be the advisers.

Stuart Duncan, equity analyst at Peel Hunt, says: “To a large extent for the big banks, it makes sense. The challenge is to do so successfully. When it comes to recruiting a number of financial advisers, there are not as many as there used to be, and established businesses are struggling to recruit as well.

“There’s lots of different parts of the UK wealth market, and the typical focus will be on the mass affluent. The challenge will be to provide a service in a cost-effective fashion.”

George Higginson, former chief executive at Sesame Bankhall, set about launching an advice company, Intrinsic, and has been in the business of recruiting financial advisers. 

He says: “You need to have something to give as an incentive, such as shareholdings or packages to help them with the transition.

“It’s not easy to move advisers. With 1825 [set up by Standard Life], what they did was they bought out a lot of the businesses. I don’t get the sense that’s what they’re talking about here.

“Whenever the banks did it before it was employed financial advisers, and in the main they’re less productive. They’re getting a salary, and they don’t have the same incentive as people who are self-employed.”

Russell Facer, managing director at Threesixty, agrees that it will not be easy to recruit financial advisers. He says: “If there’s good advisers out there, they’ll be busy and not looking for work.

“Or are they going to have good academies where they can afford to invest in training and development? A lot of the current crop of advisers come from old product providers when they had salesforces.

Schroders Personal Wealth has not confirmed the figures, and a spokeswoman says that a lot has still to be established, although 300 financial advisers would be coming across from the Lloyds’ wealth management business, and the plan is to grow the business further.

The other question is the issue of whether a bank should be getting into financial advice at all, and whether it will put pressure on its financial advisers to sell products.

A Schroders spokeswoman says that much of the proposition has to be developed, but the business would be run as a whole of market operation, on a stand-alone, independent basis.

Mr Facer says: “What it does say to me is that they see there’s a value in advice and the business by which people talk to people; it’s worth having some scale for people to distribute their products – it’s not the first time that manufacturers have been involved with distribution.”

However, Mr Higginson says that it is a surprise to him that Lloyds has gone back into advice because many banks pulled out of it post-credit crunch.

“There are two reasons banks didn’t want to be in advice, as it’s not core business. Banks are about lending out their funds.”

The second, he said, was that their margins on financial advice were not great.

Ultimately, a new force has come into the financial planning arena, and whether it will compete with St James’s Place or Standard Life’s 1825, it will be a new company looking for business.

Melanie Tringham is deputy features editor of Financial Adviser and FTAdviser.com