Skandia UK eyes stakes in advisers using Old Mutual war chest
Old Mutual Wealth – which includes the soon to be rebranded Skandia businesses outside the Nordic region – is planning to take stakes in adviser firms which become restricted as part of a major change in its business plan for the UK after RDR.
Investment Week understands new CEO Paul Feeney (pictured) has been given a mandate from the Old Mutual PLC board to invest in restricted firms.
The deals – thought to be targeted at networks and adviser businesses looking to become restricted rather than remain independent – will give Old Mutual Wealth its own adviser channel to distribute its new core fund solution range to the market.
The RDR has put adviser businesses under extra commercial pressures, and with margins tight, many advisers are considering becoming restricted in order to remain profitable.
As well as holding talks with distributors, Old Mutual Wealth is in discussions with a range of asset managers about forming a core solutions range. It intends to select ten fund houses to manage specific mandates based on existing funds already run by the groups.
This core offering will be Old Mutual Wealth’s key play in the restricted advice market post-2012, but to get on the panel asset managers are being squeezed by the Skandia platform on their current deals.
Skandia and parent Old Mutual want to increase the platform’s margins in order to improve profitability. The group has carried out a beauty parade of asset managers it wants to feature in the core solutions range. It will let the market know who has made the cut within the next few weeks.
Investment Week understands in return for gaining a place on the core solutions panel, the Skandia platform wants to take up to 45bps of a standard 1.5% AMC on a group’s funds.
Currently, advisers take 50bps in trail commission from the 1.5% AMC, with the remainder split between fund managers and platforms. Platforms typically get between 25bps-35bps, but Skandia wants to enhance its remuneration via the new deal.
Skandia is also understood to be changing the way its existing sales force is incentivised.
Under the proposed arrangement, it will only incentivise the team to sell the new restricted panel of ten funds, in a move to ensure it is a success.
In return for signing up to the panel and the new AMC agreement, chosen asset managers will also be handed some of the multi-billion pounds of life money sitting on Skandia’s books to run.
Such a deal could be attractive to asset managers, providing them with a billion pound mandate just to run a mirror version of their existing portfolio.
The change in strategy comes after a tough year for the Skandia platform, which made a loss before tax of £11.4m in 2011.
A spokesman for Skandia said: “We are talking to distribution businesses. We want to make sure we are as well placed as possible to support them.”
A number of competitors may also be interested in utilising their huge life and pensions books to help grow their businesses.
However, Old Mutual is only able to go down this road because it has a strong balance sheet and can take the risk of investing directly in adviser businesses, whereas others may struggle to free up the necessary cash.
Feeney recently revealed Old Mutual Wealth was becoming key to the wider business.
He said: “We are no longer simply owned by Old Mutual, we are Old Mutual Wealth and an integral element of the group’s growth strategy. We are combining all the talents of the Skandia businesses to create a single, stronger company with one brand, one strategy and one vision.”
This article was first published on Investment Week