Editor’s note: Schroders/Lloyds deal raises more questions than answers

By Justin Cash

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Nov 09, 2018
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Three thousand advisers. That is, roughly, what Lloyds and Schroders will need for their new joint venture, if they want to meet their goal of becoming one of the top three financial planning firms in the UK.

Honestly, us journalists should have seen this coming. Schroders has been spreading its tentacles into advice services for several years, taking stakes in planning businesses and platforms through Benchmark Capital and Nutmeg, and discretionary managers through Cazenove, as well as adding new offerings to adviser investment technology like Dynamic Planner and hiring ex-planners such as Claire Walsh for its own team.

Lloyds has been flirting with a robo-advice launch for years, while keeping a focus on high-end wealth management services.

But for such a big deal, the announcement the pair made last month was fairly light on detail about how things will actually run on a day-to-day basis.

About all we know is that Schroders and Lloyds Banking Group will set up a new joint venture business, where Lloyds will own 50.1 per cent and Schroders 49.9 per cent, with the latter firm winning an £80bn fund management mandate from Lloyds in exchange for a 19.9 per cent stake in Cazenove.

Lloyds will put £13bn of assets and advisers from its existing wealth management business into the JV, and Schroders will get £400m of existing private client assets for its UK wealth management business.

Yet we still don’t know the following: where will Schroders put that £80bn? What will the charges be in the new planning business? Presumably advisers will be restricted, but if so, how? What is the plan for hiring the thousands of new advisers needed? Will there be sales bonuses?

Will existing advisers in the Best Practice network owned by Benchmark be forced to join the JV?

How will they convince existing independent firms within the group like Aspect8 to ditch independent status if so?

Will all JV advisers have to use Benchmark’s platform technology, Fusion Wealth?

How much of their assets will go into what is effectively now an in-house DFM in Cazenove? What kind of control will Lloyds be able to exert over the products in Cazenove’s model portfolios?

The announcement talks of “multi-channel distribution”. Does this mean Lloyds will finally launch that robo-adviser? Or leverage the existing Nutmeg offering in some way? Will that just be packed with Schroders funds if so?

There is plenty to like about convenient, end-to-end planning solutions, where vertical integration between different parts of the value chain smooths the customer journey.

We will wait to see if Lloyds and Schroders can deliver that and not a Halloween horror show.

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John 5 months ago