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14 key charts from Old Mutual's mammoth wealth pitch

Old Mutual Wealth yesterday hosted City analysts and press for a bum-testing 4.5 hrs as it updated the world on its strategic progress toward a separation

Old Mutual Wealth yesterday hosted City analysts and press for a bum-testing 4.5 hrs as it updated the world on its strategic progress toward a separation from its parent group next year.

While there was little in the way of new news following yesterday morning's announcement that the business would adopt the Quilter Cheviot name post-spin-off, there was nonetheless a wealth of insight and detail into the scale of recent accomplishments and future ambitions.

We have condensed some of the most important slides from the day for your perusal  

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Old Mutual Wealth yesterday hosted City analysts and press for a bum-testing 4.5 hrs as it updated the world on its strategic progress toward a separation from its parent group next year.

While there was little in the way of new news following yesterday morning's announcement that the business would adopt the Quilter Cheviot name post-spin-off, there was nonetheless a wealth of insight and detail into the scale of recent accomplishments and future ambitions.

We have condensed some of the most important slides from the day for your perusal  

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Paul Feeney noted that the wealth management sector handled investable assets of circa £3 trillion, in a ‘large and growing market’. Almost half of this was either managed in accounts of above £5 million, largely sewn up by global private banks, or below £100,000 in accounts which would be managed by those able to strip out everything but the ‘lowest marginal costs’. In between was a £1.7 trillion mass affluent market Old Mutual wished to play for  

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If you have watched it unfold in real time its is easy to forget just how far and fast the business has already moved. From a ragbag of nine subscale European regional, largely closed policy firms, the Skandia platform and a ‘nascent, subscale’ UK asset management, the company had pulled off a self-funded transformation programme of targeted sales and purchases to create a budding omnicorp     

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Right out of the gate, the business noted that the fate of the Old Mutual Global Investors unit trust business beneath Richard Buxton was still being decided, and would not be up for discussion. It made a convincing case that the business was distinct enough from the Wealth businesses to be considered a distinct entity, with a different base of end investors and performance-driven fees    

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The company had already built up a commanding position in its five core markets, noted Feeney. While boasting little over half the CF30 staff managed by St James’s Place, that still made it the second largest home of high-calibre advisers in the UK while recent consolidation and asset growth placed it within the top five private client discretionary businesses in the UK. The business was also winning the battle for investment solutions, Feeney added

 

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This was likely to be a core driver of global asset flows over the next few years he added, for investors seeking a single packaged provider for strategies more complex than dumb discount beta. The house cited Boston Capital research from 2016 predicting the bracket would account for half the total asset flows globally over the next three years.  

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The ability to exploit the cross-promotional efficiencies of combined advice distribution and investment origination would be critical to make mass-affluent financial services add up, Feeney added. Affordable, compliant advice would be the driver of market share he said, pointing out that just 25,000 qualified advisers existed to service the entire UK population. ‘To put that in perspective advisers are outnumbered six-to-one by lawyers and 12-to-1 by accountants,’ he said.

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He added that the company had so far been ‘winning with one hand tied behind our backs’, as it focused on delivering not just on its spin-off from its parent group but also on modernising its platform capability. ‘Our existing platform lacks some key capabilities. But our service proposition has more than compensated’. Further growth would drive a disproportionate increase in margin, he said    

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Taking the mic, chief executive of in-house adviser network Intrinsic Andy Thompson noted that the company had since 2014, increased its market share aggressively, upping its number of restricted advisers 24% even as the overall number of people holding the CF30 qualification remained flat. ‘[This] puts clear blue water between us and the pack. We have a strategic advantage which we believe it will be hard for others to replicate.’   

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Almost as importantly, he noted that these advisers were in the right places with a broad distribution across the UK regions. They were also demographically well balanced, with 53% of the company’s advisers below 50 years old, versus just an industry average of 46%

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The relative youth of the adviser base also had consequences for future profitability Thompson added. ‘Clearly they will be around for longer, but actually as they gain experience and they work with us, their productivity increases,’ he explained

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Thompson handed off to Paul Simpson, chief executive of OM Investors, to discuss the company’s Cirilium range of multi-asset, risk rated model portfolios. ‘[We] are a product manufacturer at the heart of the process’ he explained. ‘Our current set-up allows us to scale up easily as the broader business grows’.

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Simpson in turn welcomed Quilter Cheviot boss Martin Baines to the stage. He pointed out that the core of the Quilter business had been one of the very first private client managers in the UK to actively court IFAs with a track record going back almost 20 years

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Due to a strong tradition of IFA liaison and a network of staff nationally to support relationships the business had been able to fit fairly quickly into the Old Mutual model since its acquisition in 2015, with internalised assets under management already increasing exponentially

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This efficient and scalable proposition had enabled the business to rapidly offset the sector-wide margin squeeze, he added, and was likely to continue to do so as the business began to distribute its portfolio service via offshore and other new distribution routes.

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