Of all the providers and platforms I have considered for this column, I find Scottish Widows the hardest to judge when it comes to predicting if it will be a winner or a loser from the RDR.
When one looks at the quantity of adviser support material for the RDR, Widows has certainly not been a slouch. For three to four years it has been producing a wide range of training material and web content. At account level, its Business Edge service provides a range of options to help advisers through their transition needs.
Head of distribution development Robert Kerr insists that one part of Scottish Widows’ proposition that gives it a clear edge when dealing with advisers is still having a well informed broker consultancy team on the ground to provide the latest information.
One does have to consider the Lloyds effect. It affects Widows in many ways. The parent bank’s financial issues are a matter of public record but there seems to be a knock-on effect through to Scottish Widows. In my experience, it seems to suffer with more resource constraints and budget restrictions than most of its peers.
I think my greatest concern is over who really controls the long term strategy for the business. When Lloyds chief executive António Horta-Osório announced the results of his strategic review of the business in June 2011, he stated clearly that: “Our goal is to be the primary wealth adviser to our UK mass affluent, affluent and high net worth customers, with a goal to more than triple the number of in-proposition customers, and to increase income per customer by more than 50 per cent by 2014. To deliver this, we will invest in new coverage models to better meet our customers’ service needs, electronic capabilities such as an improved online channel and an execution-only service, and a new investment platform incorporating Scottish Widows and third-party products.”
That sounds to me like a very Bancassurance-driven strategy. IFAs will, I am sure, note that the “goal is to be the primary wealth adviser”. This is probably a role most advisers believe should be theirs.
It is only fair to point out that I have always found Scottish Widows full of individuals dedicated to the advancement of the IFA community, but what perhaps makes the comparison more worrying is whether the CEO of Lloyds is at odds with what Scottish Widows wants to achieve.
Robert Kerr does not see this as a conflict, but believes the organisation’s continued operation of Bancassurance and direct sales channels, as well as distribution via IFAs, gives consumers choice. He identifies financial strength, brand and service as the reasons why IFAs should choose Widows as a primary partner in the post-RDR world.
Recognising that Widows is one of few companies among its peers that have not entered the platform space, Kerr says he has never been able to get comfortable that the economics work for it. He points out that the company’s retirement account is, in effect, a pension platform and sees this as a flagship product, which he does not believe will change significantly in the short term.
Scottish Widows has announced that it is entering the enhanced annuities space. A pilot will commence in November with a full launch in Q1 2013. It has also publicly stated that it is reviewing its role in the protection space, where Scottish Widows is hugely successful via its bank distribution, with a possible further launch in 2013.
While not engaging in the individual platform space in the corporate market, Scottish Widows was first to market of the major pension providers with its My Money Works workplace platform. It appears to have had some success in attracting employers to the service but this is a highly competitive area, where getting a service to market is only half the battle and the company will need to continue to invest significantly if it wants the service to be among the market leaders.
As it does not generally target the largest employers, it should not be seen as a problem that Scottish Widows’ auto-enrolment proposition has not yet appeared. The target audience is among those with later staging dates. The company has now built its new corporate pensions proposition and will be able to take business with full adviser charging from the first week in September.
Changes in its individual proposition will also commence in September with initial alterations to all products except the retirement account, where these will take place in the second week in September. A wider communication campaign during September and October will focus on broader issues, including ecommerce enhancements, where I will be particularly interested to see what is delivered as I believe it is an area where the company has been a long-term underperformer.
As part of the RDR assessment process via these columns, I am due to return to each organisation covered 12 months after the initial column to assess how well companies have delivered against their plans of a year earlier. When I revisit Scottish Widows I will be fascinated to see its progress because out of all the companies I have so far looked at, it is could be the greatest winner or the greatest loser out of the RDR.
Ian McKenna is director of the Finance & Technology Research Centre