(I made edits to this at 7.30pm on 4/5/16 to update on the Architas deal, pricing reviews and the purchase price).
Well, I was never going to be able to let this go by.
I was on a plane as I wrote most of this; the news of Standard Life buying AXA Portfolio Services, which we all know as Elevate, brokeÂ as I was driving to the airport, much to the chagrin of the SL corporate communications department, and so we held our analysis until today so that it could break formally. Oops.
Never mind, lads, no-one died.
So. SL scarfs Elevate. What do we make of it? In no particular order, here are my first reactions; weâll have more in the next day or so. Check back for more FASCINATING analysis.
- Our first thoughts today at the lang cat are about the people. Exercises like this always create lots of uncertainty for staff; there will be many worried folk driving to work today. There are some great people on both sides of this deal, and hereâs hoping it falls well for them.
- On with the show. This is an additional Â£9.8bn onto the SL Enormous Pile Of Cash. That takes the SLSL platform business up to close to Â£37bn, which we reckon makes it the biggest advised platform: Cofunds has IRO Â£35bn but a decent whack of that is D2C, and FundsNetwork wonât disclose its splits, so in the absence of better data weâre saying SL is now Johnny Big Balls.
- The price isnât public (yet) but is commonly believed to be Â£250m. Assuming a composite revenue of 30bps on the Elevate book, it pulls in Â£29.4m a year. Profit is obviously not a big story for Elevate yet. So if Â£250m is right, thatâs nearly 9x annual revenue. Wowzers. EDIT: We were told earlier today that Â£250m is way too high. Various analyst notes are putting the price at around Â£50m – Â£75m. We don’t know the truth, butÂ
- The deal includes a D2C platform (which is small at the moment) in AXA Self Investor. ASI is a pretty good proposition, so weâll be interested to see what SL does with it.
- One fact will be overlooked routinely in the analysis over the next few days. That is that the AUA isnât Standardâs, or Elevateâs, or advisersâ. It belongs to the clients. Those clients were advised to go with Elevate, rather than SL Wrap. Weâd do well to remember that.
- Suitability is a thing. Somewhere, an adviser decided that each client would be better served by a red and blue offering than a yellow and blue one (we really need Aviva to change its corporate colours, get on it lads, itâs getting confusing). As a result of that, advisers may wish to consider a fresh suitability assessment for each client.
- SL Wrap is a very good platform â it won our top prize last year â and has enjoyed more investment than Elevate, particularly on the model portfolio side, in recent years. But that doesnât remove the need for the process. If the process says âSLâ then great. But Elevate, for a time at least, was the place you went when you wanted a big provider but you didnât like SL (and I have direct experience of that from my days there).
- But itâs not that simple. It may not be commercial for advisers to do that review. Not that averages are a great guide, but the average per client pot on Elevate is Â£61k or so. Unless the client will pay a fee for the review, Iâm not sure advisers can justify the exercise. Iâd love to hear from Elevate advisers about what your approach will be.
- But itâs not that simple (again). Quite a lot of money flowed to Elevate on the basis of the Architas deal. Iâm agog to hear whether those deals will be honoured on SL Wrap. If not, then there will be more of those exercises going on. Lots of competing forces here. EDIT: I’m not agog any more. Architas confirms that it will extend the special deals to SL Wrap users.
- Price will be a thing even for non-Architas users â Elevate is cheaper than SL in pretty much all situations, and while both have done plenty of strategic deals down in the 20-25bps range (not you? Shameâ¦) Elevate has probably been more aggressive for longer. Weâll be looking carefully to see whether SL honours those deals on Elevate. EDIT: SL confirms that it will review Elevate pricing. Given that Elevate’s stepped structure makes it very effective for many clients (on a price basis anyway) this is one to watch.
- Much will be made of the fact FNZ is the common underpinning of SL and Elevate. This should, in theory, make it easier to migrate. And so it will, compared to moving off altogether. But assets do still have to move, Elevate is a different system (with some shared architecture) to SL Wrap, and itâs a bigger job than youâd think. We reckon itâs about 30% easier, on the basis that no-one can disprove that figure and it sounds good.
- This news and Avivaâs news the other day is obviously good news for FNZ; although of course this isnât new asset for Adrian and the gang in the way that the Aviva deal is, it should help streamline some of their costs. The really interesting battleground, in our opinion, isnât provider vs provider; itâs underlying tech vendor vs underlying tech vendor. Lots more on this to come.
So thatâs it for now. Huge news, this. Really the first major bit of consolidation in the UK platform market, and a logical fit. As I always say at any major change, everyone involved needs to be realistic about how brutal the transition will be, and adult about communications and setting expectations. Given where AXAâs been, this is probably the right result.
Oh, and if anyoneâs hiring Edinburgh-based corporate comms people, I suspect there might be one or two coming on the market soonâ¦