An arbitration panel’s ruling in favour of Standard Life Aberdeen over an account worth more than £100bn has been described as a “serious setback” for Lloyds’ foray into wealth management, although Schroders has confirmed its joint venture with the retail bank remains on track.
In a regulatory filing published on Tuesday morning, Standard Life Aberdeen confirmed the tribunal ruled that Lloyds was not entitled to give notice in February 2018 to terminate an investment management contract that was due to run until 2020.
The UK retail bank had yanked the contract, which is today worth £100bn, that had initially been inked with Aberdeen Asset Management because it believed the fund group had become a material competitor following its merger with Standard Life. It announced it would be handing over £30bn to Blackrock and the remaining £80bn would be placed with Schroders, with which it would also be entering a joint venture to offer wealth management services.
The termination initially had a notice period of 12 months but that went out the window in May 2018 when Standard Life Aberdeen announced it would be challenging the redemption.
Complications for Lloyds’ wealth management plans
A Schroders spokesperson told Portfolio Adviser the joint venture remains on track for launch in June as outlined in the original announcement made in October 2018. However, he would not comment on the contract to manage £80bn worth of assets for Lloyds and Blackrock similarly had no comment.
Hargreaves Lansdown senior analyst Laith Khalaf said the ruling was a “serious setback” for Lloyds.
“Lloyds has already ear-marked the lion’s share of these assets to form the basis of its new joint venture with Schroders, and has also hired Blackrock to manage some passive strategies.”
Speculating on the next steps for Lloyds, Khalaf said the bank could stump up some cash for breaking the agreement early or settle for Standard Life Aberdeen remaining the manager until 2022. Alternatively, he said there could be a “mix and match” of the two options, whereby Lloyds pays to release some assets in order to get its joint venture up and running while leaving the remainder of funds with Standard Life Aberdeen.
An analyst note from Bank of America Merrill Lynch said either scenario was positive for Standard Life Aberdeen, which has seen its share price rise 2.35% this morning. However, Schroders could take a hit if Lloyds decides to leave the assets with Standard Life Aberdeen until 2022.
Standard Life Aberdeen chief executive Keith Skeoch said the asset manager would work “constructively” with Lloyds to bring a resolution to the matter.
Portfolio Adviser understands Standard Life Aberdeen is likely to begin talks with Lloyds within the next couple of weeks.
