I’m finding it difficult to decide whether the new Schroders Personal Wealth Financial Planning business announced this week, a joint venture between fund manager Schroders and Lloyds Bank, will augur well for the Financial Planning profession.

Normally I like to take a view one way or the other but I am fence sitting on this one and the jury will be out for some time too - but why?

On the positive side, with a planned 700 advisers, it will make a big impact and it will begin to get under way as early as June, with a more comprehensive roll out at the end of the year. This could be a serious disruptor to the Financial Planning profession but it could also help expand the overall market for Financial Planning considerably and boost consumer awareness of the benefits of Financial Planning advice.

On the negative side, it could see many advisers poached from other Financial Planning firms, some unwanted competition for some firms and the re-emergence of the failed ‘bancassurance’ approach and all that entails.

It’s worth noting that Schroders and Lloyds Bank are, of course, not fly-by-nights. This is a well funded, well planned venture and they will throw considerable weight behind it.

There are many details still to be ironed out. Will it be entirely restricted in terms of advice? Will it opt for a St James’s Place model (my guess) or will it be entirely independent in terms of the advice it offers? Truly independent advice would be a brave step but one which would receive much acclaim.

We’ll find out more details in the coming weeks but one thing is certain, it will mark a milestone in the evolution of the Financial Planning profession where growth is increasingly driven by mergers, acquisitions and new entrants.

It may also mark the beginning of the end of the ‘cottage industry’ approach to Financial Planning. In future Financial Planning firms may routinely employ dozens or even hundreds of advisers and seek nationwide coverage. The emergence of true Financial Planning brands is coming.

So what’s driven this? In an obvious sense it’s just business following where the money is.

It’s getting increasingly difficult for fund managers to make money without massive scale. There is huge downward pressure on charges and fees, as any platform operator or fund manager can attest. Platforms are having to get bigger to compete and generate profits.

However, and I’m sure quite a few planners may not agree with this, margins in Financial Planning and wealth management are pretty healthy. Factor in the long term loyalty of clients, too few planners to meet demand and a healthy and growing long term, fee-based revenue stream enjoyed by many Financial Planning firms and it’s no surprise more people want a slice of this growing cake.

Increasingly, Financial Planners are morphing into DFM providers, managing the clients’ assets as well as giving advice can be very worthwhile financially and Financial Planning firms are, first and foremost, businesses and need to generate a profit. Altruism doesn’t pay the rent.

Schroders Personal Wealth will sit well in this expanding Financial Planning space. It’s not a given that it will be a success and many banks and fund managers have failed but given the pedigree of the owners all planners will need to sit up and take notice.

• I’ve been roped into an all-night sponsored walk around Manchester to raise cash for the wonderful St Ann’s Hospice which offers brilliant life enhancing care. It’s a great cause and members of the O’Donnell clan are taking part too. Find out why and donate here: bit.ly/2Er343F

Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with over 30 years of experience. He previously worked for the Financial Times Group and in daily and weekly regional newspapers. 

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