I suspect the billions that have just come in through the door won’t just be redistributed out to shareholders and the hungry, huddled masses sheltering from the spring drizzle in St Andrew Square. I’d expect some kind of acquisition pretty soon – both Martin Gilbert and Keith Skeoch, joint chief executives of Standard Life Aberdeen, are dealmakers and they’re flush right now. [SLA duly agreed to buy 50 per cent of Virgin Money just as Money Management went to press.]
I’ve always liked Maslow’s Hammer hypothesis, which is misquoted as ‘if all you have is a hammer, everything looks like a nail’. It’s better described as ‘the law of the instrument’, and what this means is that existing patterns tend to repeat.
In this context, the power of Staberdeen has moved from the insured book to the asset management business. And when you’re an asset manager, the world looks like pools of assets you can manage: icky stuff like managing clients simply gets in the way.
If that’s true, then it’s hard to avoid the conclusion that platform businesses and 1825 exist as mechanisms to drive asset flows into ASI and nothing more. That’s not a bad strategy in itself: plenty of vertically integrated businesses do it successfully – just ask St James’s Place.
But the problem is that 1825 isn’t doing the job effectively. Only 19 per cent of its model portfolio holdings are in ASI funds, and additional MyFolio flow is hardly worth the frankly brutal ball-ache of running an adviser consolidator.
The problem here is that few of the many firms who support SL’s platform stable signed up for this. They also didn’t sign up for a hybrid administration model across whatever it is the new business looks like (it seems Phoenix will administer some of the SL products that sit on Wrap).
If we take a step back, what we observe is that SL, every decade or so, tests the nerves of advisers with a big strategy change that challenges something fundamental in their business. When this goes well – the removal of initial commissions, the repricing of the back book, the introduction of Sipp and Wrap – then it’s a bit like Apple removing physical disk drives from laptops. Folk have a moan and then get on with enjoying their MacBook Air.
But when it goes wrong – ah, well that’s another matter.
If you’re an adviser reading this you shouldn’t do anything yet. The deal hasn’t even happened. If SL, Elevate or Parmenion was the right choice yesterday, it is today. You have to wait and see.
