A flood of money coming into Schroders Personal Wealth has added nearly £100bn to Schroders’ total assets but one analyst is on the fence over whether it can achieve the necessary scale to rival St James’s Place in the short time frame it has set itself.
Schroders Personal Wealth, the financial planning business Schroders launched with Lloyds last summer, attracted £12.6bn of client money in 2019, according to the FTSE 100 fund group’s annual report.
Schroders reported “record” net flows of £43.4bn last year, £32.0bn of which was from the Scottish Widows book it received as part of the joint venture with Lloyds.
Flows resulting from the deal with Lloyds helped push Schroders’ total assets to £500bn, a nearly £100bn jump from the £407.2bn in AUM it had at the start of January 2019.
Without accounting for the positive flows from the joint venture, Schroders actually saw a “modest outflow” of £1.2bn which it said was impacted by industry headwinds.
Can Schroders Personal Wealth build scale fast enough?
But Numis Securities analyst David McCann expressed doubts Schroders’ advice business would be able to achieve the scale to see its ambitions through.
When the joint venture was announced Schroders said its aim was to turn the financial advice business into one of the top three UK financial planning businesses within five years. St James’s Place, which has £119bn in funds under management, is currently its largest competitor.
“Schroders is by far the most diversified UK-listed asset manager (by asset class, geography, client type), has one of the strongest balance sheets and its unique ownership structure (c.48% of the votes controlled by the family) helps promote long-term management decision-making,” McCann said.
“Whilst we can see the opportunity in Wealth, we are yet to be convinced that Schroders will be successful in generating significant shareholder value, even if it can leverage the significant combined financial resources to build scale, given the investment spend that is likely going to be necessary to achieve the stated ambitions in building something from scratch in the stated timeline.”
McCann said Schroders should hold up better than rival fund groups during times of market stress due to its balance sheet and diversified business but said in the short to medium-term it is more exposed to broader sector pressures of fees, flows and cost than more specialist providers.
“We think growth in line with or slightly better than the sector average is a reasonable expectation over the long term,” he said.
