Lloyds Banking Group and Schroders’ joint wealth management business is to launch a price war against rivals such as St James’s Place, charging new clients less than half what they pay its largest rival.
The aggressive pricing strategy at the new venture, Schroders Personal Wealth, comes as it seeks quickly to become a big player in the financial advice market and meet ambitious asset growth targets.
It will put particular pressure on FTSE 100 rival SJP, the country’s largest wealth manager, which has been under fire over its high fees and staff sales incentives such as luxury cruises.
The industry has become notorious for using opaque fee structures that make direct comparisons of providers difficult. However, internal SPW research seen by the Financial Times shows it expects customers to pay about 3.65 per cent of their total investment in their first year, compared with 7.95 per cent with SJP and 4.7 per cent with FTSE 250 group Brewin Dolphin.
Total fees in later years will be roughly 1.9 per cent a year, compared with 2.95 per cent for a comparable service from SJP and 2.7 per cent at Brewin Dolphin, according to the research.
“Our pricing is transparent and competitive,” SPW told the FT. “We know from experience and numerous studies have shown that professional financial advice generates value. We can play an important role in helping more people plan for the future and manage their finances with a professional service.
SPW opened this year to a limited number of existing Lloyds customers but will launch to the wider public in early November, according to a recent staff presentation. James Rainbow, chief executive, told staff the business had pushed back its original launch date of October 31 to avoid clashing with the UK’s scheduled departure from the EU.
Financial planning and wealth management has become a key part of Lloyds’ efforts to boost profitability, as its core retail bank battles against a weak economic outlook and competitive pressures. Schroders is also hoping to bring in more profitable wealth management customers to offset outflows in its broader asset management business.
The FT reported this year that Lloyds had set a goal of increasing assets under management from £13bn to £25bn within five years.
However, the rollout has been hampered by problems with SPW’s IT and payments systems. Nick Allen, chief operating officer, told staff this month that there had been “lots of incidents”, but said the company was making progress in fixing them.
Shares in specialist financial advisers such as SJP have rocketed since regulatory changes in 2012 led most big banks to rein in their activities in the sector.
A spokesperson for SJP said its charges were competitive, and that SPW had overestimated the cost of its services.
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