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MM leader: The graveyard of failed distribution deals

Old Mutual Wealth’s acquisition of 3,000-adviser firm Intrinsic is a significant move.

The history of UK adviser distribution is littered with hugely expensive failures. Various providers have spent hundreds of millions of pounds buying up large adviser firms before having to write-off their investment with nothing to show for it.  

Old Mutual is hoping this time will be different as it looks to create a vertically integrated model to promote its new Wealth Select range.  

Helpfully, the majority of Intrinsic’s advisers are already restricted, unlike previous provider distribution deals which mainly looked to buy up IFAs.

Since 2009, Intrinsic’s advisers have funnelled around £1.4bn into Cirilium, its fund range joint venture with Henderson. Old Mutual says the 850 or so Positive Solutions advisers will be able to retain their independent status although question marks remain over the appetite to run a large IFA arm as part of its long-term plans.

At a press event to announce the deal last week, Old Mutual Wealth chief executive Paul Feeney admitted it is taking on a degree of liability risk as part of the deal but suggested it was a price worth paying.

Intrinic chief executive Richard Freeman said the fact the majority of its advisers have always been multi-tied or restricted means the potential for such complaints is much less than at other independent rivals. 

Certain selling shareholder indem-nities are also in place regarding future advice liabilities. However, Old Mutual should not underestimate the ability of past business to come back and bite you in the shape of future claims.

The asset manager is not alone in seeing the opportunities of vertical integration. After recently buying adviser group On-line Partnership, Russell Investments said it would be looking to launch a restricted proposition based on its multi-asset portfolios.

There are other possible deals in the pipeline as asset managers weigh up their place in the new distribution landscape. The commercial success of St James’s Place will be high in the thoughts of asset managers looking to make vertical integration plays in the advice sector. However, it has taken SJP years of toil to get its well-oiled machine to the brink of the FTSE 100.

Making the acquisition is the easy bit. Ensuring you don’t join the graveyard of failed big distribution deals will be a tougher job.



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