When addressing a group of Wealth Management Advisers on the Joint Venture (JV) with Schroders, one regional manager said: “the hounds will be set free”. He then explained that because there would be less regulatory scrutiny and supervision of the new business by the FCA – with the new business moving from a risk category 1 to a risk category 3 – it could be more creative in the products it produces for customers but more importantly, and this was the real point the regional manager was seeking to make, advisers will be less encumbered by the rules imposed on a major bank. And that’s probably the Group’s main reason for setting up the JV and offloading its financial planning business in the first place. Less regulation equals more profit.

How will the level of regulation affect the culture of the new organisation? Are we going back to a target culture of the sort that is still prevalent in other financial advice organisations? Will the pendulum in the JV swing back to a more permissive culture? These are important questions that will need to be addressed by the new Chief Executive.

When all is said and done, what Lloyds is essentially trying to recreate from scratch is a St James’s Place, the majority of which it previously owned. The decision to sell that stake, for a knock down price, will be seen as a major strategic mistake by the Group Chief Executive. Since it was sold St James’s Place has grown its funds under management from £44.3bn to £95.6bn and the number of advisers has increased from 1,958 to 3,954.

92% Increase In Business

According to an internal presentation seen by the Union, Lloyds says it expects the JV to become a top three financial planning business for customers, with assets under management increasing from £13bn to £25bn in 5 years. In order to achieve that target the number of advisers in the new business will need to increase from 300 to approximately 1,500 within the same time period. The JV is looking to increase its adviser population by 400% over 5 years whereas St James’s Place increases its number of advisers by 10% per year.  That’s a very stretching target which means the JV will be recruiting new IFAs immediately.

According to the Bank the business is also targeting 2% net new business growth per annum and, in part, that will be driven by referrals. A referral model is being built and an agreement will be put in place once the new business is up and running. That said, quality referrals to the wealth management business are not enough now and it’s part of Lloyds Banking Group. Advisers should be sceptical of any agreement on referrals when it’s a completely separate business. To be blunt, we’ve seen it all before.


Of the 540 staff who will form part of the new JV, only one will come from Schroders; James Rainbow, the new Chief Executive Officer.  So, in addition to Mr. Rainbow capable though he may be, what is Schroders bringing to the party? There is the brand and the new name of the JV will be announced at the end of February. There is also the Schroders Benchmark technology platform which, according to industry insiders, is one of the best there is. The Benchmark platform is being tested now and will go live at the end of March with new customers using the system from July onwards. Existing Lloyds customers will transfer to Benchmark over an 18-month period’ post-annual reviews taking place in order to get the customers consent. That seems an overly long gestation period given that change of ownership of the new business will be executed in November 2019. It’s worth asking whether customers will be required to give informed consent for their assets to be transferred from Lloyds Banking Group to the new JV before that date and, if so, how that will be achieved?

Terms and Conditions – The Information Gap

The Bank is running down the clock when it comes to terms and conditions. The Bank has pretty much decided everything else to do with the JV, so why is it taking so long publish the terms and conditions?

We expect the new JV to be innovative when it comes to developing a new remuneration package for advisers, especially when it is going to be recruiting a large number of IFAs who are rewarded on the basis of funds under management. It will be unacceptable to have established advisers being paid at one level, whilst new advisers get a more lucrative package.

We have told members not to do anything until they have received details of package being offered by the JV and the Bank’s delay in setting out the terms and conditions for the staff transferring to the JV is causing unnecessary anxiety. We are aware that some competitors and recruitment agencies have approached a number of advisers offering them jobs and the longer the bank delays announcing the terms and condition the more likely it will be that advisers will seek alternative opportunities, especially now they know they will be leaving the bank anyway. The longer this information gap continues, the more likely advisers will jump ship and customers will follow.

We will return to this issue in our next Newsletter.

We will keep members informed of any developments but in the meantime members with any questions can contact the Union’s Bedford Office on 01234 262868 (Chose Option 1) or email us at 24hours@btuonline.co.uk.

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