Photo: Elliott Brown
Depending upon the definition used, any one of the UK’s big integrated banking groups could have claimed wealth management hegemony at some time during the past two decades.
Indeed, it is not inconceivable that Barclays, HSBC or NatWest is currently the UK’s biggest wealth management group although it would be very difficult to prove given their unwillingness to provide full data about the extent and scale of their activities within the sector.
The only unequivocal assertion that can be made in this respect is that Lloyds Banking Group (LBG) would not feature in any discussion.
But in some respects, Lloyds is the most intriguing of all the big UK banking groups as far as wealth management is concerned.
Not only did it help reinvent private banking at the beginning of the 1990s, but under Sir Brian Pitman, its visionary chief executive and chairman, it effectively pioneered UK bancassurance during the same decade, providing a wide range of long-term savings products such as unit-linked life assurance and pensions to an affluent and mass affluent customer base.
The 2009 merger of the then-Lloyds TSB with HBOS (Halifax Bank of Scotland) enhanced its credentials as a wealth management firm. Thereafter, however, wealth management at LBG has retreated to the point at which it barely exists.
The outlook at the time of the HBOS merger was very promising.
Like Lloyds TSB, HBOS was a keen exponent of the bancassurance wealth management model and had acquired a number of businesses active in this segment of the market over the preceding decade.
These included a 60 percent stake in St James’s Place (SJP); Clerical Medical, a well-known life and pensions company; the Halifax Insurance Group; along with a number of smaller businesses such as execution only stockbroking services.
HBOS also owned Insight Investment, an investment management firm.
Launched in 2002, Insight brought together Clerical Medical Investment, Halifax Fund Management and the investment division of Equitable Life within one combined entity. In 2003 it acquired Rothschild Asset Management.
By 2009 virtually all of Lloyds TSB’s bancassurance activities had been folded into Scottish Widows, the big Edinburgh-based mutual life and pensions firm acquired in 2000 for £7 billion. This had an investment management arm called Scottish Widows Investment Partners (SWIP).
Based on this writer’s calculations, LBG’s wholly-owned bancassurance businesses managed assets of around £125 billion, of which Scottish Widows accounted for £83 billion and the HBOS businesses £42 billion. In addition, SJP managed another £21.4 billion of client assets.
Insight Investment also managed over £40 billion for external, i.e. non-HBOS clients.
Furthermore, LBG had significant private banking interests both in the UK and in international markets, including Switzerland.
Lloyds TSB Private Banking generated total revenues of and pre-tax profits of £214.53 million and £101.3 million for 2008, according to its published accounts. These are substantial volumes within the context of the UK market even today. And they just accounted for the UK activities.
If 2008 represented an apogee, subsequent progress was all one-way and downwards as LBG went on a disposal binge.
Initially this reflected the need to raise capital following the damage inflicted by the global financial crisis of 2007-2009. But after 2013 the disposals reflected a conscious decision to withdraw from international markets and focus on the UK affluent and mass affluent segments.
Insight Investment was the first to go in 2009. Its sale to BNY Mellon raised £235 million. Then the SJP holding was progressively diluted until its final sale in 2013.
Indeed 2013 represents something of a highpoint in terms of disposals.
LBG sold SWIP to Aberdeen Asset Management for £660 million. Aberdeen also received a management contract to effectively manage all LBG’s bancassurance-related assets.
In the same year LBG sold its international private banking business, including its Geneva-based Swiss private bank, to Union Bancaire Privee (UBP) for another £100 million.
This included branches in Zurich and Monaco as well as Geneva, together with a representative office in Montevideo in Uruguay.
Another transaction resulted in the sale of its Miami office to Banco Sabadell for £8 million.
All this significantly diluted the wealth management presence within LBG to the point at which its annual report and accounts included it as an appendage to its insurance-based activities and the corporate entity that encapsulated its private banking activities was wound-up (although the firm continues to offer private banking services).
Schroders Personal Wealth, the joint venture with Schroders, may suggest that wealth management may be about to assume a higher profile at LGB.
The fact it uses the Schroders moniker despite LBG being the majority shareholder suggests something else however. It wouldn’t be a total surprise, given its ambitions, if Schroders bought out the LBG stake.
As it is, LBG will seed the new venture with only around £13 billion of client assets while possibly having the same amount again in private banking-related deposits.
Meanwhile LBG’s retreat from wealth management continues. In June it sold its Channel Islands-based wealth management and investment funds businesses to London-based Brooks Macdonald.
