‘It is one thing being part of a PLC, it is another thing being the PLC,’ points out Paul Feeney, Old Mutual Wealth (OMW) chief executive.
OMW is now very close to completing its managed separation from its parent company and becoming a listed wealth manager next year. Last month, the company announced strong results, with operating profit up 29% to £134 million. It also revealed that Old Mutual had put £200 million into the wealth arm to prepare it for its planned spin-off.
‘We are pleased with the results, I think they give us a good platform for listing this business,’ Feeney (pictured) said.
While the company has already put together a strong independent board, and appointed Glynn Jones as its chairman, the team continues to prepare for the listing on the stock exchange. This includes the development of a prospectus, creating long-form reports and organising road shows.
Feeney explained that the separation from the group is actually largely complete, but to succeed as a standalone PLC, ‘we need to make sure we have a strong balance sheet and are a well-capitalised business’.
In reply to those who raise concerns about OMW’s so-called ‘vertically integrated’ model, Feeney jokes that he ‘regrets’ ever coming up with the term all those years ago.
‘I only used it to explain to a group of analysts about the model, but it’s irrelevant to a customer. I should have just said full service wealth management.’
He added: ‘Any business model has potential conflicts. You can be a pure-based single fund asset manager and still have potential conflicts. The objective is to ensure they don’t arise and how you ensure they don’t arise is as a result of your business model.’
He said that from a remuneration perspective, no one at OMW is incentivised to purchase the company’s services above others. The company uses three platforms and all of the products on those are available to its advisers.
The second control is having independent boards and an investment oversight committee.
‘We are a wealth solutions adviser and manufacturer. What we don’t do is flog our own funds. If you looked at our portfolios across Old Mutual Wealth, you’d find that our own funds make single digit percentages of our total portfolio. So 90% plus of portfolios are in other people’s funds. There is this impression, but that’s not the case.’
That is evidenced by the numbers. On 30 June, Quilter Cheviot had only around 1.7% of its total AUM and 2.9% of all fund investments invested in OMGI funds.
‘If I told our portfolio managers you have to buy our internal OMGI funds, that door would be off the hinges. You can’t build a business that way.’