Aegon chief Adrian Grace wants the company to be the technology provider in a buoyant advice market. He says: “Our job in a gold rush is to be the shovel seller. We want to sell the biggest, shiniest shovels.”
As such, Grace has no plans to acquire distribution and disagrees with those who think vertical integration is the way forward. “That is why I sold Positive Solutions,” he says. “We shouldn’t be digging for gold.”
Grace is the longest serving chief executive of a UK insurance company. In his seven years at the helm, he has transformed Aegon from a life and pensions company to a platform business focused on technology, all the while deftly handling tremendous regulatory and legislative changes.
When he spoke with Novia’s Bill Vasilieff about building a platform for Aegon, his Dutch masters were at first sceptical. But he received the support he needed from group chief executive Alex Wynaendts, and that decision transformed the business and perhaps secured its future.
Grace went on to sell off the annuity book in several tranches and last year announced plans to acquire Blackrock’s and Cofund’s platform businesses. Aegon is now the UK’s largest platform.
“We offer access across a combination of channels. People with a workplace solution can see an adviser but, if they want to, they can also buy an Isa.” He believes this is right for advisers. “Advisers want to earn money. But they also want to focus on the higher value stuff.”
Indeed, he notes advisers are happy for clients to self-serve for basic tasks. And why should advisers not be able to service self-directed investors?
“It’s about building a pipeline,” he explains. “Some of these clients may not be that profitable now but if you can give them a service that is right for them, they will come back when they need advice. We will help advisers maintain their links to these clients.”
A sports fan, Grace compares the platform market with football leagues. He believes there will be four of five premier league scale players and five or six lower-division teams – boutique firms doing something different. This sits nicely with our recent forecast that three-quarters of platform assets will sit on just four platforms within five years.
Grace thinks smaller platforms will struggle to keep up. A good user interface is expensive to build. He also points to the rapid regulatory change since he became chief executive.
“The RDR hadn’t happened at that point. We’d not yet had auto-enrolment, price caps, pension freedoms. In five years the landscape can change beyond recognition. Will the Isa be the new pension in five years’ time?” he asks.
“I am against it. We believe pensions with an upfront tax relief bonus are the best approach to retirement planning. The Government needs to get its act together on issues like the Lifetime Allowance as we shouldn’t be restricting what people save.”
For Grace, too much of his time as Aegon chief executive has been spent addressing regulatory and legislative changes. “Attention now needs to shift to getting the user interface right; to investing in the core technology.”
The conversation turns to advisory market consolidation. Grace admits he is still a fan of local advisers. The entrepreneurial spirit remains strong, he says, as does the close relationship they have with clients. These are two hurdles to consolidation.
“The last thing you can do is tell an adviser what to do. Advisers want choice. That’s why we set up our advisory board. We can’t tell them what to do. We needed to ask them and to take them on a journey with us.”
Asset management, however, is a different story. He expects the industry to experience a wave of mergers and acquisitions if there is transparency of charging. “Asset management will become a scale game, just as platforms are a scale game,” he says.
We move on to customer engagement and the number of savers and investors in the UK. He cites the fact 80 per cent of UK wealth sits with the over-50s to illustrate just how concentrated it is. “Too many of the under-45s have zippo money and their primary concern is how to pay their bills.”
Grace is a family man. Gesturing around him, he emphasises his passion lies outside of “all this”. It lies with his children, wife of 30 years and sport.
His youngest is about to head off to Silicon Valley to join a start-up and Grace says this is what he would do if he were starting over.
“That, or I’d manage Leeds United,” he says. “But judging by recent history, that would only last about six months.”
Heather Hopkins is head of Platforum.
She can be reached at firstname.lastname@example.org
2011-present: Chief executive, Aegon UK
2009-2011: Group business development director, Aegon UK
2007-2009: Managing director, SME banking, Lloyds TSB
2003-2007: Chief executive, Barclays Insurance