As one: How to make sure your asset and wealth management joint venture hits the ground running

January 09, 2020

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by Stephen Jones Asset and Wealth Management Deals lead, PwC United Kingdom

Email +44 (0)7970 775 507

by Gary Lam Value Creation in Deals Manager, PwC United Kingdom

Email +44 (0)7802 659368

The growing wave of joint ventures (JVs) and partnerships between banks, asset and wealth managers looks like a win-win. Yet, practical hurdles can cause delays in getting to market and realising their full potential. How then can you get your JV on track to deliver?

With the squeeze on management fees and margins intensifying, the chance to broaden distribution networks and increase assets under management through JVs is clearly attractive.

Banks and asset managers can enhance their suite of products and services, while wealth managers can reach new market tiers. This can also provide a catalyst for innovation and opportunities to boost economies of scale. And far from being just peripheral tie-ups, businesses are going into these collaborations with big ambitions. For example, the strategic partnership between Schroders and Lloyds Banking Group aims to create a “market leading wealth management proposition”.

Assessing capability

However, it isn’t all plain sailing, especially as the businesses coming together can often be very different.

Some of the factors that need to be assessed and addressed upfront are fairly obvious. These include whether the culture and brands complement each other. For example, could a wealth manager lose some of its cachet if it starts serving mass market consumers? In turn, how much do products geared to high net worth clients need to be tailored to meet the demands of different wealth tiers?

There are also less obvious issues relating to operational compatibility and governance, which can often get insufficient attention in the early stages of mutual diligence and negotiations. Failure to address these potential hurdles can lead to hold-ups further down the line. They can also sow doubts among investors and advisors and prevent the tie-up from getting all-important early momentum.

Clarity on the way forward

How then can your business iron out these potential problems ahead of go-live?

1/ Clear strategy and transparent view of the end-state will help drive success
It’s important to be clear about the goal of the partnership and to have a solid agreement on the target operating model of the tie-up; this unites everyone under a single set of objectives. One option is to create standalone capabilities for the JV, which can make it easier to divest in the future, but is more complicated to set up. The other is to use existing capabilities, which make it easier to ‘turn off’ if decided, but harder to spin-off.

2/ Clear and realistic appraisal of road ahead
Governance and operational effectiveness can be complicated by competing objectives and possible clashes between culture, approach to risk and ways of working within the respective groups. Gaining clarity and agreement on the way forward before agreeing to sign is essential in building a strong foundation for the rest of the relationship.

So, the trend in asset and wealth management JVs looks set to gather pace. But it’s important to get the nuts-and-bolts considerations dealt with ahead of the agreement, or they could delay and even derail the chances of success. Therefore, we encourage business leaders to evaluate all aspects of the JV and form a robust plan of action to maximise value and minimise leakage.

We’ve recently launched the latest in our M&A insights, Creating value beyond the deal: financial services. Based on insights from Financial Services corporate executives, we explore what they do to create value from their M&A. Download the report today.

by Stephen Jones Asset and Wealth Management Deals lead, PwC United Kingdom

Email +44 (0)7970 775 507

by Gary Lam Value Creation in Deals Manager, PwC United Kingdom

Email +44 (0)7802 659368