What next for Aberdeen and Standard Life’s platforms?

Martin_Gilbert_2013_700.jpgAdvisers have welcomed the £11bn mega merger of Standard Life and Aberdeen but want more clarity on the future of their platform propositions.

This week Standard Life and Aberdeen announced a merger deal which is set to create one of the biggest asset management groups in the UK and the second largest in Europe.

In the past two years both firms have acquired a platform, with  Aberdeen acquiring Parmenion in 2015 while  Standard Life bought Axa Elevate last year, which it added to its existing Wrap platform.

Investment Quorum chief executive Lee Robertson says the announced merger could see the groups keeping “the best bits” of the two platforms, as there is already an “overcapacity” of platforms in the market.

Platforum head Heather Hopkins says the focus of the two firms will stay on funds and distribution, rather than their platforms.

She says: “We don’t know yet how Parmenion will be treated in the newly combined entity of Standard and Aberdeen. Parmenion is a relatively small platform – though profitable.

“However, I don’t see an obvious fit for Parmenion alongside the Standard Life Wrap and Elevate platforms. Standard Life and Elevate offer two doors into the market. Parmenion is a very different integrated discretionary proposition, run on proprietary technology.”

Thameside Financial Planning director Tom Kean says there is not much clarity on what the firms intend to do with their platforms.

He says: “The firms don’t seem sure. It looks like Standard Life is super careful on what it is saying about the platform. Maybe this means this is not an important part of what they are doing.”

The Aberdeen/Standard Life merger is expected to result in cost savings of £200m a year, and reports suggest up to 1,000 jobs could be at risk.

Standard Life chief executive Keith Skeoch and Aberdeen chief executive Martin Gilbert will run the combined business.

Despite initial concern the deal may cause outflows while the detailed terms and regulatory approvals are ironed out, advisers do not think the merger will cause any major market disruption.

Robertson says: “Larger firms by their nature are realising they are running too many funds and that they have gaps in their ranges, with Aberdeen focusing on emerging markets and Standard Life Investments on the whole market.

“The only thing I am not sure on is how the joint co-CEOs strategy will work. But both businesses are really well run so in the end we will have a word-class asset management business.”

Kean adds: “The two groups will merge and make Standard Life more cost-effective. They’ll take the best from Aberdeen and get rid of the overlap. It’s an obvious marriage.”

According to a list of fund firms compiled by Willis Towers Watson, Aberdeen and Standard Life would rank 22nd among the world’s largest asset managers by assets, with around £660bn in total.

It will become the third largest in the UK after L&G Investment Management and HSBC, both large passive investors.

Robertson says advisers should keep an eye on the managers they already follow within the two groups, as they may still run funds within the new entity.

But big name managers may choose to start their own boutiques instead, following in the footsteps of managers such as Neil Woodford.

He says: “Some fund managers wouldn’t necessarily want to work in a big combined group and some might leave and set up their own boutiques, given that some of the recent shakeouts from other firms did very well.”

Investment Quorum holds the Aberdeen Asian Income trust in one of its model portfolios and plans to keep it. The firm used to hold the Standard Life Property fund but sold it after the Brexit vote. It also previously held SLI’s GARS fund.