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Platform focus: Old Mutual Wealth is at a critical juncture

Seath-Miranda

Old Mutual Wealth has been attracting column inches since South African parent company Old Mutual Group announced it would split into four different businesses by 2018: a South African bank, an African insurer, a US asset manager and a UK-based wealth manager. As the Old Mutual group looks to consciously uncouple from its UK wealth business, we take a look at how the UK platform fared in 2015 and what the future might hold.

Old Mutual Wealth in the UK is a vertically integrated proposition. It combines the Old Mutual Wealth platform, adviser network Intrinsic, discretionary fund manager Quilter Cheviot, Old Mutual Global Investors and Old Mutual International. In Old Mutual Wealth’s recent quarterly results it reported an annual operating profit for the business of £307m, up by 35 per cent. This shows its vertically integrated model is delivering profitability.

The platform had a solid 2015. Year-on-year growth stands at 11.36 per cent, the highest growth on a percentage basis of the top three platforms by assets under administration. The platform’s AUA grew by 6.3 per cent in Q4.

The platform’s success in attracting pension assets in the wake of pension freedoms ramped up growth last year. In the last three months advisers have rated Old Mutual Wealth as the second platform, behind Transact, they would most consider placing new assets on. This survey took place before the announcement of the break-up of the group, so we will monitor if this has any impact next quarter.

Old Mutual Wealth has taken further steps to deepen vertical integration – adding Quilter Cheviot to Intrinsic’s DFM panel and combining Quilter Cheviot and OMGI into a new investment division.

But if the platform has ambitions to develop its on-platform model portfolio services and to cement integration with Quilter Cheviot, it should offer access to exchange traded funds and investment trusts. Advisers we surveyed say:“Great service, support, fair cost for our client segments; however lacks access to equities, investment trusts and ETFs”, and “no access to ETFs but it’s good for general use”.

There is also frustration from advisers that the platform does not offer access to a cash account.

The platform is praised for the quality of its tools, and its retirement income forecaster is one of the best we have seen.

Old Mutual Wealth, like many other platforms we track, is  replatforming, in this case to IFDS. In its preliminary results, Old Mutual Wealth confirmed further delays to the completion of this project, estimating 2018 as the likely end date. But replatforming should enable Old Mutual Wealth to offer access to the investment trusts and ETFs its users would like to see.

Its challenge is to keep control of the costs so the predicted £450m spend by project completion does not spiral. While it is replatforming, Old Mutual Wealth needs to maintain service levels and functionality on its existing platform.

The so-called “managed separation” of the Old Mutual Wealth business could result in either the acquisition of Old Mutual Wealth by a private equity firm or an initial public offering. The business is looking at a number of options. This uncertainty over ownership presents a challenge for the platform’s bosses. It could affect new business, although Old Mutual Wealth’s vertically integrated model could mitigate the impact. It is also critical it meets its revised replatforming deadline.

Old Mutual Wealth has made good strides in 2015, with positive user feedback and steady growth. It forecasts it will deliver growth through expanding its ranks of restricted advisers. It is also seeking to buy up firms through its practice buyout programme. Growth in pension products is also set to continue. We hope to see Old Mutual Wealth maintaining momentum in 2016.

Miranda Seath is senior researcher at Platforum

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