Seeing a big name exit a market always gives cause for reflection.
For M&G, one of our biggest asset managers and life assurers, pulling out from the wealth space is a case study in why the existing vertically integrated solutions are important to big players; but it also shows how hard it is to jump on the bandwagon.
If we look at the mainstay of the vertically integrated wealth market, where advice, platform and asset management are working in harmony, we probably think of Aviva, Quilter and St James' Place as being the success stories in this space.
Each has a strong focus on the end-to-end solution, bringing tailored solutions for the advice market, and supporting their own advisers so that at each level of the process there is the opportunity to reap rewards and improve margin from a customer.
The interesting point is that, of these three you have one that grew from advice, one that grew into advice, and one that still plays a wider financial services role but has a heavy footprint in wealth. Yet all bring the same support to the table, just in varying degrees of adviser, cost and service approach.
So why would these firms not make the decision that M&G has? Perhaps the better question is why did M&G get it so wrong?
Part of the answer to this question is that M&G did not have a wealth solution at all three levels of the process. Yes, they are a premier asset manager, but their funds are pure asset management, set up for performance at institutional and retail levels, but not built with the advice process in mind.
M&G has, in the distant past, dabbled with such devices, but none has ever really landed well outside of one packaged product.
Prufund was M&G’s answer to this challenge, but as the recent announcements suggest, while it might have served as a differentiator or de-risking factor for a portfolio, it was not a panacea for platform customers, and typically not why a platform was selected by the independent adviser community using the platform in the first place.
If this had been the only restricting element for M&G, then the decision to exit might not have been so easy, but unfortunately there was also the topic of how the value from advice could be crystallised.
To advise or not to advise – or perhaps in this instance it is go big or go home. The successful entities in the vertical space have acquired businesses in quite an aggressive manner over a number of years.
This means that the need to spend big on marketing is lessened as the adviser base has a profile, an extensive customer base, and is generating the necessary deal flow.
