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The future of Old Mutual: Will a breakup be hard to bear?

With more than 150 years of history behind the Old Mutual brand, what does the future hold for its advice, investment and platform arms as the group prepares to split?

The market is looking to the future for Old Mutual’s advice businesses as they prepare to rebrand under the group’s “managed separation”.

Old Mutual-owned advice network Intrinsic is one of only three advice businesses to have passed the 3,000 planner mark (the others being St James’s Place and Openwork).

Its Private Client Advisers business is also expanding, with offices in Chester, Cumbria, Yorkshire, Birmingham and Devon focusing on higher-value clients.

The two businesses are set for significant change.

Old Mutual plc announced it would split Old Mutual Emerging Markets, Nedbank, Old Mutual Asset Management, and Old Mutual Wealth (which runs its platform and advice businesses) from the parent company back in 2016.

In total, Quilter has more than £110bn in assets under management and is one of the most recognisable financial services groups in the world.

Two years on from the announcement, each part of the company will soon be taking a version of the Quilter brand.

Discretionary fund manager Quilter Cheviot will retain its name, but Intrinsic and PCA will be known as Quilter Financial Planning and Quilter Private Client Advisers respectively, and the OMW platform will become Quilter Wealth Solutions.

Old Mutual plc says it will sell up to 9.6 per cent of ordinary shares in the company, when it lists Quilter later this month.

Quilter probably has a good enough reputation, so from a branding perspective will probably be all right

In the first phase of the break up, Old Mutual Wealth will list on the London Stock Exchange as Quilter plc and include the distribution of 87 per cent of the total issued share capital to Old Mutual shareholders.

The second step will be the listing of Quilter in South Africa, and the third step is the division of Nedbank, to take place within six months.

Old Mutual plc says the separation will cost around £230m, but should deliver around £95m a year in savings.

Money Marketing spoke with Quilter executives to see what impact the break-up will have on its powerful advice, investment and platform arms.

What’s in a brand?

Old Mutual Wealth PCA director Dominic Rose says the focus on acquisitions will ramp up across the firm’s six offices to build capital as it begins its two-year Quilter rebranding.

PCA has bought 17 advice firms in the past two years, including the most recent acquisition of Scottish advice firm, DG Pryde, bringing in £200m assets under advice.

Rose tells Money Marketing several more transactions are lined up in the coming months, and that the group has seen an increase in interest from firms looking towards consolidation.

The average firm approaching Old Mutual holds between £200m and £300m assets under management.

Rose says: “We have no shortage of firms we are talking to, but there is a genuine focus on not buying up businesses for the sake of it or to hit an acquisitions target. We’re getting a large number of firms coming directly to us, and given we have a proven track record of executing transactions, a large number come directly and we’ve seen an increase as a result of Mifid II and GDPR.”

He adds: “A lot of advisers are thinking about hanging up their boots and retiring or joining a network and we have a very clear integration strategy once we buy firms. Everything on day one becomes PCA, and all systems and procedures change over to ours.”

Old Mutual contacts advisers for replatforming advice

Rose says the handover process from the point of acquisition is just six months long, and includes personality matching exercises between clients and incoming advisers.

All clients at any acquired firm meet with PCA within three months, and Rose says their position within the “managed separation” will be explained by the adviser as part of this.

Rose did not comment on the capital available for acquisitions during the separation, but says rebranding will not have a negative impact.

He says: “Operating under one brand and bringing together everything can only strengthen our proposition and we’re quite selective about the firms we do end up acquiring.”

He adds: “We focus on whether their clients will be better off joining us and on how we can integrate them effectively as well, and so the focus now is on acquiring retiring advisers’ client banks, then those business owners will hand over their clients.”

A consultant close to Old Mutual says the Quilter name already has strong recognition in the industry as part of the Old Mutual brand.

They say: “It probably has a good enough reputation in the marketplace, so from a branding perspective, they’ll probably be all right and it won’t detract from the business overall.”

Rennison Consulting’s Roderic Rennison is also confident the rebrand will not put clients off, but warns there are still hurdles to overcome.

He says: “It will need to work hard at the branding element, but there is no reason it shouldn’t ultimately succeed.”

Tying parts together

For subsidiary advice network Intrinsic, its £24m acquisition of Caerus in February and the integration of another 300 advisers is still in process.

However, the deal did not attract a blockbuster value, so will arguably be lower down Old Mutual’s priority list.

Network founder Richard Freeman will bow out ahead of Quilter’s June listing, retiring after 13 years with the group.

Gbi2 director Graham Bentley says the rest of the integration process is likely to be smooth, given the low number of advisers set to enter. He says: “I don’t see the Caerus integration as an issue versus the 3,000 advisers already in Intrinsic.”

HEAD-TO-HEAD: Will the Old Mutual split have an impact on advisers?

John-Cowan-2014-700.jpgYES – John Cowan, executive chairman, Sesame Bankhall Group

In Old Mutual, you have a situation where the advice end of the business was losing money, but the fund managers were making plenty of profit.

That’s not the right construct and a split could bring focus to the business, which will probably be welcomed. If I were an adviser, I would welcome the break-up of the group and the establishment of a separate advisory division. I think you’re just removing the conflicts of interest and that’s a good thing.

It’s good for the client and it’s good for the advisers. Only time will tell whether breaking up the group is the right thing to do. Ultimately, it’s about transparency for the customer.

If the customer gets better service through that, then that’s a good thing. I have problems with all suggestions of vertical integration because the customer never really gets a full explanation.

MB 700NO – Mike Barrett, consultant, The Langcat

The folk at Skandia, sorry, Selestia, er, Old Mutual Wealth, no, Quilter plc are saying that once listed, from a client’s perspective it’s effectively a rebranding project.

And let’s face it, they are experienced in delivering these exercises: there should be no need to press the panic button. But advisers can still keep a watchful eye. For starters, it’s considered good practice by the FCA to reassess your platform due diligence whenever there is a major corporate event.

In reality, this should be straightforward. These sorts of big corporate shifts can often trigger some changes at the senior leadership level, and advisers might find usual contacts have either changed roles or moved on.

Sometimes there are concerns raised about a provider’s business strategy, and whether the provider is effectively competing with them, for example via a direct business and/or an in-house advice business.

There isn’t any evidence of this in the Old Mutual Wealth world, and indeed the greater proportion of its platform flows are generated by advisers independent of the group.

On the investment side, Old Mutual sold the single strategy arm of asset management business Old Mutual Global Investors to a partnership of chief executive Richard Buxton, the senior management team and private equity house TA Associates.

The £600m sale was confirmed in December, involving a total cash consideration of £570m, with an additional £30m payable on the release of surplus capital associated with the separation from Old Mutual Wealth.

The majority of OMGI’s senior staff have remained with the business, with the obvious exception of the business’s Hong Kong-based team, which was scrapped in April following a fund review.

Bentley says the future of OMGI is likely to depend on Buxton’s ambition, but will not need the veteran’s reputation for success, since the strategy of pushing OMGI offerings to advisers through Old Mutual Wealth platform sales team to advisers was a strong one.

He says: “It’s the ‘sticky’ business – the only switching influence would be the clients, not the advisers, nor would the impact of gatekeepers like fund researchers and ratings agencies influence flows. The multi-asset business doesn’t need Buxton in that it’s a solutions business sold by its own Intrinsic distribution.”

A consultant close to Old Mutual says that spinning off different bits of the business might make them more focused

While Old Mutual Plc group chief executive Bruce Hemphill left the Quilter board on 19 April, Bentley says the sold-off OMGI business was where leadership was at its strongest.

He says: “The OMGI single strategy leadership is outstanding. I’m not sure there is anything like that profile of talent anywhere within either the existing Quilter Cheviot team, or the multi-asset team.”

A consultant close to Old Mutual says that spinning off different bits of the business might make them more focused.

They say: “The Old Mutual businesses aren’t that tightly integrated, so it would probably not be that difficult to spin off the different bits. That could be good for advisers because it’ll allow the individual business components to focus on what they do and develop in their own way.

“There is a duplication in particular between OMGI and Intrinsic where they have some similar products and it will certainly take the tension out of the relationship which might be easier in many respects.”

Looking to the future

The head of Old Mutual’s Financial Advice School Darren Smith tells Money Marketing that he will focus on getting candidates ready for any planning job, not just with Quilter.

The school’s 58-week adviser training programme currently sits at 113 students, with 12 more to start in June. Of the cohort who will graduate with Level 3 and 4 qualifications, Smith says more than 40 per cent did not join from Intrinsic or PCA.

It has taken three years since Old Mutual acquired the school in 2015 to reach its student capacity, which Smith says may increase if another trainer is brought in. It is also set to offer a Level 6 qualification, the Diploma in Financial Planning, by the end of the year.

This offering will likely be popular with existing Old Mutual group advisers to upgrade their qualifications.

Smith says he will look to follow the success of St James’s Place, as the rebranded Quilter school expands its intake during the managed separation.

He says: “Quilter is really looking to push the advice market forward, which means we need to bring in more restricted financial planners in our own business, so there is a logic we would look to build an SJP-type model.”

He adds: “This is about the industry, not just about Quilter and I think that’s how we’ve got the numbers relatively quickly. If you graduate from SJP you’re trained as an SJP adviser, but what we do will be a little broader.”

Rose is confident plenty of advisers will want to work under the Quilter name as acquisitions expand its footprint. Recent FCA data also shows increased uptake in restricted advice.

He says: “Once we explain our restricted proposition to IFAs we’ve acquired, we don’t have any problems. The independent versus restricted badge is becoming less of an industry issue than it used to be. The terminology is unfortunate, but it’s not an issue.”

The overarching message for advisers, Smith says, is that Quilter will be looking to establish itself positively as an industry representative.

He says: “The government always acknowledges the pensions gap and the savings gap, but it’s an adviser gap, and the only fix is to bring more good people into the industry. It’s no longer about one’s own business, it’s about the whole industry.”

A HISTORY: Old Mutual plc

1845: Founded in Cape Town as Mutual Life Association of Cape of Good Hope with no capital other than policyholder premiums

1885: Rebranded to the South African Mutual Life Assurance Society

1966: Formation of the SA Mutual Unit Trust Company to administer mutual funds

1995: Launch of Old Mutual Investment Advisers in Boston

1995: Old Mutual opens Asia office in Hong Kong

1997: Stockbroker and investments manager Capel-Cure Sharp created

1999: Demutualisation and listing on London Stock Exchange and Johannesburg Stock Exchange

2001: Old Mutual acquires Fidelity & Guarantee Life

2006: Acquisition of Swedish insurer Skandia

2007: Old Mutual SA launches the Old Mutual Investment Group

2009: Old Mutual sells Fidelity & Guarantee Life to Harbinger Group

2016: Old Mutual sells its Italian wealth management arm

2016: Announcement of managed separation strategy and rebrand to Quilter plc

2017: OMAM separates from Old Mutual plc

2018: Quilter plc lists on LSE

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. The advice part of OM should be separated well away from the rest – Australia preferably. If you use an OM Platform or some of their funds you don’t want to be in competition with their direct sales force.

    One of the reasons I never used SWF after Lloyds took them. Why would one want to advise on a bank proposition when there are plenty of alternatives. It’s called differentiating your service.

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