Despite the Budget and subsequent rumblings, the proposed Standard Life and Aberdeen marriage is the defining news of the week.
‘SLAberdeen,’ as the potential tie-up between Standard Life and Aberdeen is being called for now, would be the third largest UK asset manager (based on a ranking by Willis Towers Watson) and 22nd globally.
The shift to passive investing is certainly putting pressure on active houses. Data we collect from platforms reveal that 18% of adviser platform assets are in passive products (it’s 5.5% for D2C platforms). Yet the Asset Management Market Study is just as worrying to execs in active houses.
We all know that building scale is one of the few things active managers can do to counter price pressure. SLAberdeen is a scale play for cost savings. Yet merger or not, the cost of active management will come down for retail investors.
Strikingly, Standard Life plans to drop “Life” from its name. We often hear that the life companies have morphed into asset managers – as a strategy for survival. SLAberdeen will be, without a doubt, an asset manager.
I don’t expect the firm will abandon distribution. In fact, distribution (via the platform and a restricted salesforce) will be even more important with an increased range of funds to sell. What will happen to Parmenion, which was only acquired a year and a half ago, remains unknown. We’re not sure that it sits comfortably with Standard Life Wrap and Elevate but it is has strong growth and profitability.
Back to the budget, the annual exercise in fiscal probity and largesse didn’t deliver any big surprises. But there were several nice nuggets. Our top five:
1. We got confirmation that employer-arranged financial advice valued up to £500 will receive National Insurance as well as income tax relief. This is good news for advisers. £150 was never going to get advisers very far down the advice journey. In our recent Workplace Savings Guide, we noted that 56% of advisers and EBCs offer individual advice in the workplace. The majority is pre-retirement pension advice. Advisers tell us revenue from individual advice in the workplace is increasing. But the employee will need to pay. 82% of employers tell us they won’t shell out for financial advice for employees.
2. The three-year NS&I investment bond was confirmed with an interest rate of 2.2%. We hear from advisers that they often point clients to these bonds for cash holdings, despite the minuscule £3,000 investment limit.
3. The class 4 rate of National Insurance contributions for the self-employed is set to increase in 2018 and again in 2019, although some back-pedalling on this looks just possible.
4. In an unexpected move, the Chancellor announced that the dividend tax allowance will reduce to £2,000 in 2018/19. An adviser we spoke with this week lamented that this change coupled with the lifetime allowance and the annual contribution limits on pensions mean that taxation for the wealthy is becoming very complicated. Complicated rules can be good for business for accountants and financial advisers – but it also means that more people risk running foul of HMRC inadvertently.
5. Also unexpectedly, Spreadsheet Phil has a sense of humour, lacing his speech with dollops of #HammondHumour.
We hope to see more from the Treasury in the autumn to encourage long term savings and in particular to support engagement among younger investors. Send your thoughts on the Budget or SLAberdeen to me on heather.hopkins@platforum.co.uk or tweet them to @theplatforum.