Change Happens Slowly, Then All At Once. Thoughts on the Current Financial Services Landscape

It seems that we’re at a point in the evolution of retail financial services in the UK, where the tectonic plates are really beginning to shift.

The news that Vanguard is closing its personal financial planning division after only two years took everyone completely by surprise.

A reputable company with the deepest pockets who have always made it clear that they are playing the long game.

As a mutual company, owned by investors, Vanguard can avoid the tyranny of quarterly shareholder reporting and the incessant demand for quick profits experienced by their publicly listed competitors.

If any organisation could make such a project work, surely Vanguard could.

And yet they couldn’t.

It demonstrates just how difficult it is to succeed in the complex regulated UK financial services market.

At the same time, St. James’s Place posted positive results and a big jump in assets under management and profits.

Their numbers in any other year would be excellent. In a year when, sadly, war returned to Europe, inflation hit levels not seen in decades, and we had a bear market in both stocks and bonds, they're incredible.

SJP are well known for its “reassuringly expensive” fee model and has certainly had its share of negative press coverage.

By contrast, Vanguard’s mantra was that costs matter and investors should focus on minimising their fees and charges wherever possible.

Should we conclude that in matters of personal finance, a big brand name, combined with a personalised, one-to-one human experience, offers a sense of reassurance and security that low-cost digital offerings can’t compete with?

It’s certainly clear that SJP is doing something right that others have failed to replicate.

Over on the retail side of the big investment banks, Morgan Stanley has seen their share price soar, largely due to the success of their wealth management arm.

Goldman Sachs on the other hand has struggled as their big corporate M&A deals dried up.

Their CEO was recently quoted in the FT as saying they had big plans for their own wealth management offering, attracted to the “high margins and recurring revenue stream.”

Good for the big banks, not so good for their super wealthy clients whose fees will be funding these wonderful new profit streams!

Still, when these huge institutions start to focus more on wealth management and investing for private clients, the rest of the market shouldn't ignore the change.

And keep an eye on abrdn. After a challenging year when they dropped out of the FTSE100 due to a precipitous fall in their share price, they quietly sold their Discretionary Fund Management division, abrdn Capital to LGT.

They’ve also put their ￡14b private equity division on the market and are likely to sell it this year.

One wonders what the future holds for other non-core assets of the group such as the adviser business which has struggled for several years now.

The Chinese consider “interesting times” to be a curse, but I disagree.

Interesting times can create interesting opportunities.

At Capital, we’re growing, we’re building, we’re hiring.

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