Firing lineDec 6 2022

M&G boss: We want to be a top five player in the wealth market

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M&G boss: We want to be a top five player in the wealth market
David Montgomery, managing director at M&G Wealth. (Carmen Reichman)

For David 'Monty' Montgomery, the influx of private equity money into the financial advice industry is not necessarily a good thing.

Having conducted several large acquisitions in his short time as managing director at M&G Wealth – the savings and advice business of M&G – he says that private equity's tendency to short-termism may not be in the long-term interests of the consumer.

He says: "In this industry, when you're trying to acquire firms to flip and sell on to make money, I'm not sure that's the best thing for the advice business or the customer. 

"Big institutions who are in it for the long term and are focused on customer outcomes, which we are, are a better long-term owner."

Acquisitions rolling in

Since joining in January 2020, and currently sporting a moustache on the last day of 'Movember', the charity month in aid of men's mental health, Montgomery has overseen several big acquisitions.

He was involved in the acquisition of Ascentric, which created M&G Wealth in September 2020; there has been Sandringham Financial Partners – the advice business started by SimplyBiz founder Ken Davy; TCF investments, an MPS; and he is in the process of another advice business acquisition, Continuum. 

We would want advisers to look at these brands and say 'I want to join this business'. 

This is all part of a bigger strategy to make M&G Wealth an all-round player in the financial advice sector, after M&G PLC was merged with Prudential UK, before together the two businesses were split off from the bigger Prudential company, which under its own listing now just focuses on business in Asia.

M&G Wealth now sits alongside M&G Investments and Pru UK (the heritage business), and comprises M&G Wealth Advice, which includes the old Prudential Financial Planning tied adviser business, and The Advice Partnership, now known as M&G Wealth Advice, alongside the independent brands, Sandringham and Continuum, and a hybrid advice business, in partnership with Ignition Advice.

Then there is the platform, Ascentric, now called M&G Wealth Platform, and M&G Wealth Investments, which offers model portfolio services and Prufund.

Montgomery says: "We had some component parts of an advice business, but we were quite narrow – we only had Prufund [as part of Pru UK], it was the only offering that we had, and you could only get access to Prufund in a packaged product.

"The market was shifting towards platform and MPS and we as M&G did not offer these types of solutions – we had some capability but not all of these components. We want to be a top five player in the wealth market.

"We were already working with 4,000 professional advisers – that's where the vast majority of our business comes from. We also see that there's a growing advice gap in the market where people are looking to get advice because they can't get it because the cost of providing advice has gone up."

In addition, he says, advice firms are consolidating to mitigate the extra regulatory costs and the age of advisers has gone up. "800,000 people a year are going into retirement. These people are looking for help, advice and guidance."

Customers want greater validation they're doing the right thing. There's an inherent need to get reassurance from a human being.

For this reason, Montgomery has been rapidly building the business, both through acquisition and recruitment to the academy, which currently has 50 people, so that, not counting Continuum, there are now around 470 advisers operating under the M&G Wealth umbrella.

Both Sandringham and Continuum are keeping their brands. "They have a good brand, and they've built that up over time, we don't see any need to change their brand," and they will not be asked to migrate all their clients over to Ascentric or get special deals on M&G products.

"Obviously we would want them to use our solutions, but we would want other advisers to do the same, and they need to negotiate like with any other product.

"If we can make it as easy as possible for Sandringham and Continuum to use our investment solutions, we're making it easier to run their business, and it should be easier for anyone else in the market."

But as well as the fully fledged advice business, he is keen to develop the lower cost hybrid service.

With this service he says: "You never talk to an adviser from start to finish, we've reduced that process down. There's lots of steps in the process such as customer fact-find, attitude to risk, suitability reporting, the advice rules are bound up in the solution, then the adviser comes in and supports the customer.

"There was a trend with robo-advice. What we found is that actual physical advice is important on the journey, at the start and at the end – the customer needs to understand where they're going throughout the journey.

When you're doing something virtually you tend to cut to the chase. In some respects that's a good thing, you're not wasting as much time, but you do lose a bit of the social aspect of it.

"The customer is putting their life savings into a retirement solution, they want greater validation they're doing the right thing. There's an inherent need to get reassurance from a human being."

After a busy corporate acquisition spell, Montgomery is fairly clear that he does not foresee the need for any other major acquisition.

"We will never say never to an acquisition of an advice business, if there's a good fit to one of our three businesses", but he is open to individual advisers joining the business, people who are looking to do a buyout, either to stay with the business or for those who are retiring.

"We would want advisers to look at these brands and say 'I want to join this business'. 

"If they are looking to retire, we will help them over a period of time to transfer those clients to someone in this business, and we will buy them out, we will match them to an adviser."

Montgomery joined M&G Wealth at a strange time, barely a month before lockdown in 2020, and was faced with the challenge of adapting to a new company culture virtually, while also being the new boss of his division.

He says: "We all had to learn how to do our job again. You have to spend 20 odd years learning how to stand in a conference room to speak to hundreds of people, how do you get to those hundreds of people virtually?"

As well as this, he also conducted negotiations online, buying Sandringham in August last year, and Ascentric in September 2020. 

The problem is that there's an advice gap. As an industry, we're all trying to solve it.

In some ways, the process was more efficient. "You're not sitting in a room sweating out the small stuff and keeping going; when you're doing something virtually you tend to cut to the chase. In some respects that's a good thing, you're not wasting as much time, but you do lose a bit of the social aspect of it.

"The way we do it in a physical setting is you would mix social and business."

He is fairly sanguine for the advice industry over the coming months as the economy gets tighter. "In volatile markets and times of uncertainty, people are generally looking for help and support – the market for advice is going to grow. If you're in volatile times then the quality of advice is appreciated.

"The problem is that there's an advice gap. As an industry, we're all trying to solve it."

Ultimately, he has certainly learnt from other areas he has worked in and brought with him fresh insights. Montgomery spent 10 years in the energy sector before joining financial services through Aegon.

"There's the same challenges and issues in all sectors; you have the same challenges and the same customers trying to achieve the same things."

Melanie Tringham is features editor of FTAdviser