Australian spinner leads private banking push

Standard Life, once seen as a traditional Scottish insurer, has been rebuilding its distribution system and investment platforms under the leadership of Trevor Matthews, the company’s amiable Australian chief executive of life and pensions business. The changes come against the background of a shift from crisis back to profitability, huge job cuts and a £5.5bn (e8bn) demutualisation planned for the summer. One of the key changes is a move away from protection to investment products, with a consequent, gradual switch in distribution channels from financial advisers, which once accounted for all of Standard Life’s business, to private and retail banks. A new team will put together bespoke products for private banks and stockbrokers, hoping to offer a selection of funds under a guided or open architecture system. “There is a lot of potential for private banks in the next 10 to 15 years, with baby boomers retiring, and more money than ever available to invest for retirement-type ages,” says Mr Matthews, who sees the initiative as eventually spreading beyond the UK’s shores. He envisages that the banks can buy his company’s “wrap” programme, a computerised system, which can offer a range of funds, asset allocations and administration of accounts. Banks can populate the platform with their own or external funds. This means Standard Life takes care of the technological and admin headaches, and can also select external funds through its arrangement with consultancy Wilshire. Poor processes in private banks “Some banks are better organised than others in terms of technology systems,” believes Mr Matthews. “We have identified very poor processes in some private banks. They are battling to get technological spend and resources. We are sure there are opportunities for us there.” He also sees huge potential in working with retail banks, particularly UK institutions struggling with depolarisation regulations, allowing them to sell a choice of external funds. “There is a lot of potential for the big banks and we are keen to help them move from single-tied to multi-tied agreements,” says Mr Matthews, envisaging a system of “guided” architecture in the UK’s retail banks, similar to that which has taken root in Germany. “But how can they get their distribution machine working? This is the issue they have to crack.” He speaks from a wealth of retail banking experience, having run the National Bank of Australia’s branch network, selling life products through the bancassurance model. “Some of the banks have clearly got potential. Barclays are bringing their IFAs [independent financial advisers] into their branches, with one adviser for every 5 or 6 outlets. This is something we did in Australia. The job of the teller is to spot a lead and pass it on to the adviser when he is visiting the branch.” While Standard Life espouses the open platform concept of distribution, there is also the luxury of having its own investment house, Standard Life Investments (SLI). “We are very much in favour of open architecture, but we are blessed with the fact that our insurance company has a fantastic investment management company, as not all insurance companies do,” says Mr Matthews. “We are very keen for a lot of money that comes to us to go into SLI products, but open architecture is demanded by the market place, and that’s fine with us. “There is nothing wrong with having a large number of funds on your platform. If the market wants that, you have to cater for that. But the nature of asset allocation and financial structures are much more important than the decision of whether you go into a Fidelity or Artemis special situations fund. I have seen the reverse happen, often with tragic consequences for clients. That’s why it’s so important for the advisory community to move up the spectrum and focus on the big picture of things, rather than just stockpicking.” Apart from in-house funds, among the most popular groups favoured by clients using Standard Life’s menu are Fidelity and New Star. But Mr Matthews is keen for the provision of funds to lead to deeper partnerships with those groups who have the right culture. Boosting distribution “Distribution is all about compatibility of organisations. Fidelity is a fine organisation, and they are a competitors of ours in terms of fund flows,” says Mr Matthews, alluding to both the US group’s fund management arm and its Fidelity Funds Network distribution platform, which competes directly with the Standard Life machine. “But we are their clients and they are also ours, so they make a good partner. If they come to us and say ‘let’s do something in country A’, we would be more inclined than working with those we didn’t know. The key thing I am looking for in partners is distribution capability. In fact there are three things which I am most concerned about: distribution, distribution and distribution.” In order to boost Standard Life’s distribution capacity, Mr Matthews encourages his teams to travel broadly and adapt the best ideas from the markets they visit. “I am more and more keen for my guys to understand what is going on in the distribution arena around the world, and see if they can apply those ideas here,” he says. He dispatched an initially sceptical group of “five fellows” to Australia and New Zealand in 2004, to hold 50 meetings in five days, with the challenge of better understanding the “wrap” concept, which had yet to take hold in the UK. “They came back and told me they wanted to implement the programme,” says Mr Matthews, appreciating the irony that the new converts have ended up as even more evangelical devotees of wrap than a long-term believer like himself. But his favourite example of taking an idea in one country and deploying it in another, relates to the US Surgeon General’s report on smoking in 1979. This landmark official volume which has pride of place in Mr Matthews’ office book-case, was published while he was on a working visit to North America. “The Surgeon General actually concluded that, horror of horrors, smoking is bad for you,” says Mr Matthews. “I rushed back to Australia and suggested we cut insurance premium rates for non-smokers.” Every insurance company in the world followed suit.

Matthews: not all insurers have good investment management