Culture!

I was intrigued to read that Aviva will be buying Succession for £385 million and I wish both parties the best of luck. However, experience suggests that there will be some significant challenges ahead. In fact, there is little evidence that institutions acquiring financial advice firms achieve their goals. Sometimes the issue is weak due diligence such as the recent debacle where Quilter found £35 million of DB to DC  liabilities after the deal with Lighthouse Group was done. But most of the time I think it is down to culture.

The product of IFAs and other professional services firms is people. Clients buy people and perhaps a brand. Life insurance companies are manufacturers of products. It’s a completely different business. Most of the people in a professional service business spend most of their time with consumers. Very few of the thousands of people working for product providers ever meet their consumers, most of them don’t even speak to them, and even fewer ever meet the IFAs who recommend their products. Two completely different cultures.

The mind set of executives in insurance companies and asset managers tends to be quantitative and analytical. They pay attention to details and are ruled by logic. And that’s how it should be. On the other hand, financial advisers tend to be qualitative, intuitive and creative free thinkers. As a result, teamwork between these two groups of people can be very difficult to create.