Lloyds Banking Group plotting to take on Hargreaves Lansdown with £100bn personal pensions and investment arm
Lloyds Banking Group is plotting to take on Hargreaves Lansdown with a £100billion personal pensions and investment arm.
The bank’s wealth and insurance boss Antonio Lorenzo revealed that billions of pounds flows out of Lloyds to companies such as Hargreaves Lansdown, which is the UK’s biggest funds supermarket managing £135.5billion of assets.
He said Lloyds wanted to build its own version of the Hargreaves platform, which lets investors buy funds and shares inside Isas or self-invested personal pensions (Sipps).
Challenge: The bank’s wealth and insurance boss Antonio Lorenzo revealed that billions of pounds flows out of Lloyds to companies such as Hargreaves Lansdown
Lorenzo told The Mail on Sunday: ‘We have only around 3 per cent of the direct-to-consumer pensions and investments market. Every year, more than £10billion is moved from Lloyds to personal pension providers. Our ambition is that in three to five years, we want to grow to more than 10 per cent.’
The lender bought online retirement website Embark Group in a deal that is set to close as soon as next month. Lorenzo said: ‘Hargreaves Lansdown has [more than] £100billion assets. In Embark, we will have in the region of £60billion. Our ambition is to be north of £100billion in the near term.’
The bank has a significant foothold in workplace pensions through its Scottish Widows brand. It also snapped up employee pension provider Zurich in 2017. And it joined forces with fund giant Schroders in 2018 to offer advisory services to the ‘mass affluent’ – middle-class clients who tend to have more than £100,000 to invest. It also took a 19.9 per cent stake in wealth manager Cazenove.
But until now, Lloyds has had only a small presence in the personal pension market and no offering in the execution-only fund space, where customers invest without using a financial adviser as a lower cost alternative. Lorenzo is planning to use Embark’s technology to launch a ‘robo-adviser’ that will guide customers on how to select funds and other products.
He is also plotting to sell self-invested personal pensions at scale using Embark’s technology.
The aim is to provide the products through customers’ banking apps, so they will be able to easily shift money from their current account or savings into the retirement products. Lloyds has some 17.7million customers using its app. Sipps and retail investment are among the last areas that Lloyds can grow. It already dominates retail banking and any further growth could lead to action by the competition watchdog. The bank has a 26 per cent market share of credit cards, 23 per cent of current accounts and 19 per cent of mortgages.
Hargreaves Lansdown has long led the execution-only pension and investment market – although its promotion of fund manager Neil Woodford, whose funds plunged and were forced to close, impacted the amount of new money that flowed in last year.
Lloyds also faces newer rivals. JP Morgan recently snapped up online wealth manager Nutmeg and has bold ambition for its new digital bank Chase in the UK, which will involve selling wealth management and retirement products.
Paul McGinnis, an analyst at Shore Capital, said: ‘With Embark, they’re going after self-service customers, like Hargreaves Lansdown.
‘Are they being a bit ambitious? I think they’re going to find it tough. Hargreaves Lansdown is a formidable competitor with a 40 per cent market share. The space is quite competitive.’