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Lloyds Bank’s plan to become a major player in UK wealth management by teaming up with Schroders is set to end as it began: with a missed deadline.
The rollout of their joint venture in 2019 was hampered by tech problems and uncertainty around Brexit. This month, the venture’s annual results will be published late due to a backlog at Companies House. Those accounts may be Schroders Personal Wealth’s last: Lloyds plans to take back control of the entire business.
These minor delays speak to a bigger issue that has dogged the partnership since the start: building a large wealth management business in the UK is surprisingly difficult.
Financial advice is one of the most attractive segments of the UK financial sector. Profit margins are high, capital requirements are low, the number of potential customers is growing and the Financial Conduct Authority is trying to reduce regulatory barriers. But because of that, everyone wants a piece. Banks, private equity firms, asset managers, insurers and advice specialists are all fighting it out.
Schroders Personal Wealth could have been a formidable opponent, combining the network of the UK’s largest retail bank with Schroders’ investment expertise, while badging the venture with a brand that appeals to well-heeled clients.
But it struggled to meet ambitious early targets. Assets under management rose just 15 per cent between 2019 and 2024, to about £16bn. Assets at rival St James’s Place — which used to be majority-owned by Lloyds — rose 63 per cent over the same period.
New businesses that want to offer in-person advice have additional challenges. Besides keeping customers happy, they also need to attract quality advisers. That can prove difficult for high-street banks given their history of running hot and cold in their commitment to wealth management. Even app-happy young investors may prefer real human advisers as their wealth gets bigger and their needs more complex.
True, neither Lloyds nor Schroders is giving up. Lloyds hopes to benefit by bringing all its mass affluent services under one roof, while Schroders still targets a similar customer base through its Benchmark Capital arm. If anything, competition will only grow: JPMorgan Chase was the latest heavyweight to announce grand expansion plans earlier this week.
Lloyds boss Charlie Nunn has less at stake than his predecessor António Horta-Osório did when the Schroders venture launched. Then, low interest rates limited the bank’s other growth prospects; that is no longer the case. It can afford to invest and wait a while for the pay-off, much like the so-called “HENRYs” wealth managers covet: High Earners, Not Rich — Yet.
nicholas.megaw@ft.com
