View more on these topics

Vertical integration: It’s about fund flows, stupid

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Who wants to become the new St James’s Place? According to industry analyst Ned Cazalet, Old Mutual Wealth does, as does Standard Life, as do all the other traditional life companies making a bid to reinvent themselves.

Cazalet’s insightful reports (or “provocations” as I have alternatively heard them called) have form in making providers and the wider financial services industry sit up and take notice. Cazalet is well versed in knowing what buttons to press to challenge the status quo.

In his latest analysis of the life and platforms market, he is sceptical about whether vertical integration really is the golden goose providers are making it out to be.

One of the arguments centres around profitability – if major advice firms have failed to turn a profit up to now, what makes providers and fund groups convinced they will do so as part of their stable?

The obvious rebuttal is vertical integration is not about profits at all. It’s about fund flows, stupid.

As has been pointed out to me, for an asset manager to be concerned about the money flowing into their investment solutions is hardly a crime. And it is also worth noting some of the investment solutions to emerge as part of this wave of vertical integration may actually be broader in scope than the investment offerings of some IFAs.

But the question is how the in house advice, platform and investment management process is packaged up. Who is the ultimate beneficiary of cost efficiencies and better margins – the shareholders or the client?

Money Marketing understands the FCA has already started to sniff around this part of the market, and asked to see business plans which may include stated quotas on fund flows as part of adviser acquisition deals.

The shift to vertical integration has been pitched as a solution to the dilemma of serving mass market clients in the most cost efficient way possible. That may be true.

But with the best will in the world, the vertical integration trend leaves me with a slightly sour taste. Despite everything firms have gone through with the RDR, the emphasis on professionalism, the move away from providers owning stakes in distribution, we now seem to have come full circle with providers owning advisers outright. The difference is, now they own the platform and the investment management parts of the value chain too.

Natalie Holt is editor of Money Marketing – follow her on Twitter here



Creating a monster: The race to become the new SJP

A major industry report examining the future of UK financial services has warned the race to become the new St James’s Place has created weak business models which are unlikely to drive long-term profit. Money Marketing has exclusively obtained a copy of the latest report from influential industry analyst Ned Cazalet, whose explosive Polly Put […]

FCA interior logo 620x430

FCA raises fund disclosure and distribution concerns

The FCA has raised concerns over closet trackers, unclear disclosure and distribution controls following a thematic review of asset management firms. The first results from the review show a number of asset managers have failed to disclose closet tracker funds, while others did not have clear descriptions of funds. The FCA says asset managers need to ensure product […]

In Focus Ebola cover - thumbnail

White paper — In Focus: Ebola Virus Disease

Jelf Employee Benefits focuses on Ebola Virus Disease (EVD) and what this means for businesses with operations in West Africa. This will be of particular interest to those with employees either travelling to, or living within, West Africa, the area affected by the most catastrophic outbreak of Ebola to date.


News and expert analysis straight to your inbox

Sign up


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

  1. Peter Robertson 2nd June 2016 at 1:34 pm

    Sorry, but if vertical integration is to be done properly it’s about capturing the advice charges not the fund flows and having a blend of face to face to robo advice that means cost to income ratios are much better than, say, Towry or SJP.

    Chasing fund flows or platform assets is what the “stupid” would think/do.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm