Old Mutual cost-cutting may see Skandia sell-off
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Advisers believe Old Mutual’s vow to be “ruthless” with poorperforming parts of its business gives weight to speculation that Skandia UK could be sold off.
Old Mutual: ‘Exit markets not capable of 15 per cent return over next three years’
Advisers believe Old Mutual’s vow to be “ruthless” with poorperforming parts of its business gives weight to speculation that Skandia UK could be sold off.
In its preliminary results last week, Old Mutual set out plans for £45m of annual savings across the business by 2012 through reducing Skandia’s cost base.
It says it will retain businesses which meet its “capital and risk requirements, add value to other parts of the group, have scope for sustainable future growth and are capable of creating future shareholder value”.
Group chief executive Julian Roberts says: “We will exit markets where we do not have scale or our operations are not capable of achieving a return on equity of 15 per cent over the next three years.”
Richard Jacobs Pension and Trustee Services managing director Richard Jacobs says he has been working for a year on the assumption that Skandia will be sold. He says: “When you are in this limbo, it is hard to know whether to continue to support the firm or wait and see what happens. We cannot afford to gamble with clients’ money.”
He adds that the efficiency drive will inevitably affect service. He says: “Skandia has closed its branches and is now very lean and mean. Thankfully, computerisation has meant the administration has not suffered but I just cannot see how they can make any more cuts.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “This cost-cutting will be repeated with other providers as we move towards 2012 and those that do not take this kind of action will probably not be there in 2014.”
Skandia last month revealed it was to cut 150 jobs as part of plans to reduce operating costs by 20 per cent in 2010 as it also made plans to cut its platform charges. In November, Skandia said it was proposing to close nine regional adviser support offices and 100 sales staff were
likely to face redundancy as a result of the closures.
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Readers' comments (2)
Simon Mansell | 18 Mar 2010 4:17 pm
Skandia is ahead of the game and the name of the game will huge be cost cuts as RDR is forced on an unwilling industry. The FSA has done huge damage to UK financial services and plans to do even more with RDR. However, Skandia are well placed in this matter. Maybe other providers are taking the Gordon Brown approach to cost cuts but when they are forced to they will find it difficult to match Skandia's IT systems and efficiencies. For all those Skandia employees that read this make sure your understande who is putting you out of work - it is Gordon Brown's FSA.
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Anonymous | 19 Mar 2010 2:22 pm
Old Mutual bought Skandia to access the UK and Nordic regions-areas they (OM) had little presence and conversely strong business regions for Skandia.Surely the OM board also knew these regions were highly regulated and facing margin pressure?Look at where AVIVA and The Pru have focussed in recent years-the Far East where they enjoy greater return on capital than the UK.If OM sell Skandia they might as well say goodbye to the UK market forever given the fact they already have had a presence in other guises.Skandia gave them one of the leading IFA brands which they are now slowly destroying
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