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David Montgomery, M&G Wealth

David Montgomery, M&G Wealth

By Yuri Bender

M&G Wealth’s David Montgomery believes the stability associated with its name will allow the new enterprise to flourish

In a competitive UK wealth space, targeted by US, European and local players, it is often difficult to differentiate between rival participants, providing commoditised investments to high net worth clients and their advisers. Positioning his fledgling firm in this densely populated, tightly regulated marketplace, M&G Wealth boss David Montgomery has decided to focus more on longevity and branding. 

“There is a bit of stability, trust and strong capability about our brand and market presence,” argues the quietly convincing Scot, who joined M&G to help create the wealth unit in September 2020. “This is important when dealing with people’s money. You need that credibility.”

Although M&G has now split from former owner, the Prudential insurance company, the team which managed PruFund, a flagship product designed for “actuarial smoothing” of returns, moved over to M&G when the two companies demerged in 2019.

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There is a bit of stability, trust and strong capability about our brand and market presence

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“Asset allocation is fundamental to good portfolio construction, and there is a team doing this for the PruFund for many years on a massive scale. This means we have access to that heritage and capability,” he says. February’s acquisition of model portfolio specialist TCF adds further asset allocation expertise. 

“We are in this market for the long-haul. We are not a private equity business, buying advisers or platforms to sell on three years later for a profit,” says Mr Montgomery. 

Commentators say that while the M&G franchise struggled at the start of the pandemic, with poor performance and outflows, the wealth unit, which already advises assets worth £28bn ($38bn), has potential. “This is a very powerful retail brand, which is why the Pru paid top dollar for them,” says Amin Rajan, CEO of the Create-Research consultancy. “M&G now wants to use that brand to leverage its way into the wealth world. The expertise is definitely there.”

The recent buyout of UK boutique firm Sandringham Partners boosts adviser numbers to 400, edging slowly towards M&G’s medium-term target of 1,000. The traditional Sandringham franchise, where an adviser looks after 30 to 100 families, is the premier end of the service spectrum. The more automated the relationship, the more families an adviser is expected to serve, although Mr Montgomery denies digitalisation is purely about cost savings. 

“Our strategy is about plugging the advice gap, rather than saving costs through technology,” he says, believing a more digitalised offer will attract both advisers and clients. “There is a real opportunity today for hybrid advice, as we make it easier for advisers to do their business, through technology, automation and digitalisation.”

Advice gap

Recruiting advisers, many of whom are on the brink of retirement, is challenging. “This is not just a pandemic problem, there is a real advice gap, with not enough advisers in the market,” laments Mr Montgomery, known simply as ‘Monty’ to colleagues.

His solutions include an academy for the “next wave” of younger advisers, and a flexible self-employed working model, albeit one with tight controls to prevent product mis-selling. “This is not just ‘anything goes’ from an independence perspective,” he affirms. “We will have the right compliance, governance and oversight of any advice business working with us, affiliated to our organisation. We are still responsible for providing good outcomes for customers.”

Despite the industry’s conservative nature, colleagues say his keenness to learn from different businesses and geographies, particularly the US, whose leading player JP Morgan is entering the UK digital wealth space through acquiring Nutmeg, sets their boss apart from other managers. His recent deal with digital investment specialist Moneyfarm also provides a direct service to clients. 

“The UK has a lot of catching up to do, which we are learning as a wealth manager,” says Mr Montgomery, sharing the experience he gained in Colorado as chief operating officer of Transamerica, Dutch company Aegon’s individual life insurance business. “When I worked in the US, we used to visit Silicon Valley, looking at start-ups, working out where the next Starbucks was coming from and how we could apply those ideas to our own business.”

Key to this development is building networks, something several private banks have tried, though not always successfully. “You have to look at building a community that does it in the right way,” he says, referring to the next generation’s reliance on social media platforms Reddit and TikTok, even for investment advice. “We should not fight this, but as  a wealth management industry, show them how we can use our standing and experience to build communities, helping them invest in a secure way. All of this makes ours a more interesting space.”

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