standard life...2 this presentation may contain certain “forward-looking statements” with...

Standard Life Leading the post-RDR adviser platform market

Leading the post-RDR adviser platform market | December 2013

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This presentation may contain certain “forward-looking statements” with respect to certain of Standard Life's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words “believes”, “intends”, “expects”, “plans”, “pursues”, “seeks” and “anticipates”, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Standard Life's control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Standard Life and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Standard Life’s actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in the forward-looking statements. Standard Life undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements it may make.

Introduction Barry O’Dwyer Managing Director Adviser & Workplace


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Agenda

• Market context • Strategy and proposition • Competitive positioning • Leading the post-RDR adviser platform market • Q&A

Market context Eddy Reynolds Head of Adviser and Investment Propositions


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Our UK retail business profitability is growing

Cont

ribut

ion

(£20m)

£60m

H1 (£8m)

H2 (£6m)

H2 £10m

H1 £25m

H2 £29m

2010 2011 2012

FY £10m

FY £54m

FY (£14m)

H1 £nil

H1 £37m

H1 2013

Contribution from UK retail new

Growing profit contribution from ‘Retail New’ business


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Platforms are an important driver of UK retail growth

1. Wrap, FundZone, SIPP (inc. AMPP), TIB and International Bond 2. Wrap and FundZone

Platforms AUA2

UK retail new AUA

Asse

ts u

nder

adm

inis

tratio

n

£0bn

£35bn

H1 £25m

FY 2010 FY 2011 FY 2012

£19.2bn

H1 £nil

Q3 2013

£7.2bn

38%

£9.7bn

£22.0bn

44%

£12.9bn

£26.3bn

49%

£16.3bn

£30.8bn

53%

UK retail new total AUA1


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Demand for advice and adviser platforms

7.4m seek occasional advice 2m purely advised

4.3m self directed

Complexity of solution drives requirement for platform

4

Investment solution

Investment solution

Investment solution

Tax Wrapper Tax wrapper Tax wrapper

Trust Trust

Platform custody, management and reporting

7.4m seek occasional advice

Complexity of problem drives requirement for advice 3

Investment solutions Trusts

Customer’s needs

Tax wrappers

Regulations Case law

Legislation Economy 0

50

100

150

200

250

300

350

16-24 25-34 35-44 45-54 55-64 65-74 75-84 85+

£ bi

llion

s

2/3rds of financial wealth, totalling £700bn, is owned by over 55s.

Propensity to seek advice increases with wealth, age and complexity

0%

20%

40%

60%

80%

100%

Annuity Drawdown

£55k income – tipping point where people become significantly more interested in seeking professional financial advice. £150k+ income – where interest in advice peaks.

% of market which is independently advised,

2012 est.3

1

2

2

Demographic split of UK financial wealth1

1. Office for National Statistics: Breakdown of property, physical and financial wealth, by age band of HRP: Great Britain, 2008/10 2. JP Morgan: Winning propositions: The consumer market post-RDR 3. MINTEL: Pensions – Intermediary Focus – UK, January 2013

Customer


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Regulatory influences on advisers and platforms

2013 – HMRC brief Tax treatment of fund

rebates

2013 – FCA Platform Payments and Rebates

Rebate based platforms at big disadvantage

Key delivery dates: 2014, and then

2016 sunset clause

3rd Theme – Requirement for transparent pricing structures

2012 – FCA The RDR

Professionalism and Adviser Charging

2nd Theme – Rise of ‘ongoing advice’ propositions

Validation of risk based solutions

e.g. MyFolio, SLW

2012 – FCA CIP Guidance

2008 – Global Financial Crisis MyFolio

1st Theme – Growth of Centralised Investment Propositions (CIPs)

Strategy and proposition David Tiller Head of Adviser Platforms


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Strategy and proposition

• Meeting all adviser needs • Strong commitment to adviser support • Clear pricing structure, choice and flexibility • Benefit of our buying power • Success of Standard Life investment solutions


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Trusted business partner: advisers are looking for much more than an admin provider

Full service flexible platform with

access to wide range of investment

options

Business Services

Asset Migration

Technical Support

Consultancy

Co-creation

Regulatory & Compliance

Advice market increasingly sophisticated • Complex client requirements

• High degree of regulatory oversight

Adviser businesses more professional • Want to focus on core advice activity

• Turning to wraps to lower business costs and reduce risk

Clear winners and losers • Working with leading advisers prospering from RDR

• Greater focus on due diligence

• Highlighted as big winner in platform space by Platforum (October 2013)

Building long term relationships • Around 1/5th of firms on wrap with AUA > £20m

• Helping advisers grow assets, reduce costs, manage risk

• Going beyond admin to offer ‘value add’ services

• Business support and development

Supporting adviser

businesses

Business principals select platforms - not business writers


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Our proposition addresses all adviser needs

1. Genuine business partner model

Strategic commitment and financial

strength

Support in the field

Premium client service

Expert business support

2. Gives advisers flexibility and control

Extended DFM capability

Specialist Investment

Hub

Enhanced tools and reporting

Extended investment

range

Outsourcing and model

portfolio support

Full wrapper selection

4. Focus on adviser business efficiency

Shorter, more efficient adviser journeys, integration with

adviser systems

Simpler, clearer reports & statements/mobile

technologies

3. Progressive view of regulatory change creates competitive advantage

Progressive adoption of new regulations – simple clean unbundled transparent

Advisers can focus on business growth, not on regulatory compliance

Third Party Administrator

Full service Wrap Platform

Investment platforms

Increasing complexity/sophistication

Underpinned by the strength of the Standard Life Group


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55%

Persistency – Wrap platforms vs. fund supermarkets

Standard Life

Axa Ascentric Transact AJ Bell Cofunds J Hay

9.80

Nucleus Skandia Fidelity

53%

26% 32%

55%

75%

49%

Q3 2

013

net s

ales

as %

of g

ross

sal

es

Wrap platforms Fund supermarkets / SIPP platforms

77% 78%

64%


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Unique distribution capability supports growth

Source: 2009-1012 NAPF, estimates: Standard Life

SL share: 19%, Accounts: 3,000

SL share: 1%, Accounts: 1,400 SL share: 5%, Accounts: 8,000

32,428 meetings with advisers

across 3,694 locations

26,595 outbound calls from 11

telephone based account managers

5,216 attendees at events (many CPD

accredited )

Helping with topical issues: lifetime allowance, auto enrolment, price

transparency

£20.9bn 62%

£10.9bn 32%

£2.1bn 6%

2012 advised market new business £33.9bn MaximiseRe-engageSupport

Our segmentation strategy

Strong platform relationships • Over 100 managers in the field UK wide

• Highly qualified and skilled:

• 80% level 5 qualified or higher

• Degree level training in business consultancy

• Further support through threesixty services

• Telephone-based support

• Technical hotline


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Giving adviser flexibility and control – leading support for investments

Investment Hub

Advisery models Discretionary management

Risk-rated fund solutions

Range of top discretionary

managers

• Clear segregation of investment activities

• Bulk management of switches/rebalances

• Programmed & ad hoc rebalancing

• Client exclusions/CGT Management

• COBS compliant reporting

Outsourced investment solutions Self-managed investment solutions

Clean and discounted funds + wide range of tradable assets

Including access to MyFolio at market-

leading terms

Including access to Standard Life Wealth at market-leading terms


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Capturing assets across the value chain

Client, tax wrapper & investment admin

Client acquisition & advice services

SLI single asset class funds

SLI risk-based funds, and

SLW discretionary portfolios

Investment manufacture

Investment solution construction

Core platform revenue

2

1

3

4


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Based on terms available to a £100k client of a strategic account typically with £20m+ on platform and example fund with 1.5% retail AMC, 0.75% clean AMC and 0.66% discounted clean AMC

e.g. 0.66% Fund + 0.4% Platform & Tax wrapper + 0.5% Advice = Total cost 1.56%

Simple unbundled pricing

Much misunderstood rebate-based discounts created high headline prices.

Few clients understood the net price they were really paying.

Headline price 2013 = 2.10% minus rebate Headline price 2014 = 1.56%

Significant reduction in ‘Headline’ prices

Value of fund discounts was lost behind high headline fund prices (e.g.1.5%)

Standard Life receives fund discounts averaging 9bps on around 50% of platform assets – the value of this discount will be clear in the post-RDR clean market

Market price of fund = 0.75% Standard Life price of fund = 0.66%

Value of fund discounts enhanced

Advisers and clients benefit from a new simplified pricing structure


19 19

Bundled share class

Perception

Reality

Reba

te

150bps

75bps

66bps

Net

Net

Simplification and buying power together make it easy to demonstrate value

Fund price transparency Clean pricing has material impact on perceived value

SL e

nhan

ced

reba

te

Average fund discount achieved 9bps


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Bundled share class Clean share classes

Perception

Reality Perception = Reality

Clea

n

SL c

lean

Reba

te

150bps

75bps

66bps

Net

Net


Fund price transparency Clean pricing has material impact on perceived value

SL e

nhan

ced

reba

te


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Wrap platform price transparency Clean pricing has material impact on perceived value

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Platform with rebates Platform with discounts

Perception

Reality Perception = Reality

60bps

43bps

Reba

tes

Net

Actu

al



22

Platform price transparency Clean pricing has material impact on perceived value

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0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

£100k £200k £500k £1m

Standard Life (core)

AJ Bell

Ascentric

AXA Elevate

Cofunds

FFN

Skandia

Transact

c10bps

The premium in our proposition is paid for by fund managers – not customers


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Fully unbundled and simplified

platform charging

6/4/14 PS13/01 compliance

6/4/16 sunset clause

No further transition required

31/12/13 RDR

Super clean negotiations

Bulk conversion of all assets to clean

Uploaded 2,000 clean funds

Committed to meet clients’ tax liability for

2013

Committed to move to fully unbundled and

clean

Early adoption of RDR

Helping advisers move from trail to fees

No requirement for unit rebating

No client tax liability, no tax collection, no tax reporting

Move to clean funds mean simplified reporting and no future tax liability

Clean fund deals gives price advantage

Fully unbundled clean platform

Anticipating and dealing with regulatory change

“2016 ready” in 2014


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Positioning Standard Life to win the future, not defend the past

Firms ranked by sales

Platform reliant on rebate revenue

Platform fee already disclosed

Rebate free clean fund

model

Able to secure fund discounts

Platform or advised led conversion?

Standard Life No Yes Yes Yes Platform

Cofunds For legacy Not for legacy No Some Adviser

Fidelity For legacy Not for legacy No Some Adviser

AXA Elevate No Yes No Some Adviser

AJ Bell For legacy Not for legacy No No Adviser

Ascentric No Yes Yes No Platform

Skandia For legacy Not for legacy No Yes Adviser

Transact No Yes No No Adviser

Nucleus No Yes No No Adviser


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1. Highest standards of price transparency

4. Wide range of flexible investment options to help advisers deliver their client propositions

2. Clear buying power through simple discounts

5. Broad-based business support to help our adviser firms to prosper in the post RDR market

3. No legacy: simple, consistent client treatment

7. Disruption to adviser businesses minimised

6. Regulatory change completed quickly and early

Ready to win in the post-RDR market

Standard Life – the first clean post-RDR platform proposition

Our advisers will be meeting clients, not managing regulatory change

Leading the post-RDR adviser platform market Eddy Reynolds Head of Adviser and Investment Propositions


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Platforms net sales Q3 2013

1. Cofunds do not disclose advised platform sales separately. Based on data reported by Fundscape, Cofunds’ Q3 2013 gross sales (incl. institutional sales) were £6,113m and net sales (incl. institutional sales) were £3,258m. This implies outflows of £2,855m. Fundscape state that they estimate Cofunds’ institutional business at ~40% of assets and flows. We have therefore estimated Cofunds’ advised platform sales at 60% of gross sales. In addition, we have assumed that due to the stickier nature of institutional business, all net ouflows relate to the advised business. Our estimate is calculated as follows: (£6,113m*60%)-£2,855m=£813m

4.90

£916m

Standard Life

£813m1

Cofunds AXA AJ Bell Ascentric Skandia Transact Fidelity Nucleus J Hay

Sale

s

£0bn

£1bn

£533m

£451m £440m £412m £408m £342m £326m

£152m


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33 platforms operate in

today’s market

2013 2018 Fundscape: Q3 2013 net sales2

1st Standard Life

2nd Cofunds

3rd FundsNetwork

Platforum: 12 months asset growth1

1st Cofunds

2nd Fidelity FundsNetwork

3rd Standard Life

1. Platforum, UK Adviser Guide, Issue 16, November 2013 - year on year AUA growth 2. Fundscape, Q3 2013, Cofunds net sales adjusted for institutional business

Concentration amongst platform providers creates opportunity to increase our market share


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£75bn

£0bn

Standard Life Wrap is positioned for growth

Additional opportunities in adjacent markets

• Private client DFM accessible AUA c£250bn

• Workplace, corporate, offshore c£200bn

Source: 2009-1012 NAPF, estimates: Standard Life

Asse

ts o

n ad

vise

d pl

atfo

rms

£0bn

£750bn

2013

£20.9bn

£10.9bn

£231bn1

£65bn

£600bn3

2008 2018e

Ass

ets

on S

tand

ard

Life

pla

tform

s

£2bn Market share:

c3%

£17bn2 Market share:

c7.5%

Outperforming in a fast growing market

Assets on advised platforms

Assets on Standard Life platforms

1. Platforum Platform guide Q2 2. As at 30 September 2013 3. Deloitte Recognising RDR Reality


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Leading the post-RDR adviser platform market

• Demand for advised platforms will continue to grow • Advisers are looking for much more than admin providers • Capability to capture assets across the value chain through investment solutions • Unique distribution support and buying power • Positioned to win the future – not defend the past

Outperforming in a fast growing market

Thank you Q&A

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