STANDARD Life Aberdeen has begun a war of words with arch rival Scottish Widows after confirming that it will not allow the plug to be pulled on their £109 billion asset management agreement without a fight.
Earlier this year Scottish Widows and its owner Lloyds Banking Group announced that they were putting a long-term management agreement signed with Aberdeen Asset Management under review due to the latter’s August 2017 merger with Standard Life.
Aberdeen had managed the money invested across Scottish Widows’ pensions and wealth arms since buying Scottish Widows Investment Partnership in 2014.
Read more: Scottish Widows pulls plug on £109bn Standard Life Aberdeen deal
Having conducted a six-month review of the arrangement following Aberdeen’s merger with Standard Life, Scottish Widows chief executive Antonio Lorenzo said in February that the deal had “resulted in our assets being managed by a material competitor”.
“Therefore, we will begin an in-depth assessment of the market to identify a long-term strategic partner, or partners, to manage the current £109bn of assets,” he added.
While it has been reported that JPMorgan Asset Management, BlackRock and Schroders are among the fund houses in the running to win the contract, Standard Life Aberdeen said yesterday that it does not believe Scottish Widows has the right to terminate the contract.
“Standard Life Aberdeen has informed Lloyds Banking Group that it does not agree that, following the merger of Aberdeen Asset Management and Standard Life, Standard Life Aberdeen was in material competition in the UK with Lloyds Banking Group and that, therefore, Standard Life Aberdeen does not consider that Lloyds Banking Group, Scottish Widows or their respective affiliates has the right to terminate the [investment management agreements],” the company said.
“The parties are engaging with each other within the framework of the dispute resolution process envisaged in the [management agreements].”
Read more: Standard Life mulls ways to keep Scottish Widows work
In response, a spokesman for Scottish Widows said the business was “disappointed” with Standard Life Aberdeen’s comments and reiterated its belief that the two firms are now material competitors.
“Standard Life Aberdeen is a clear and material competitor of Scottish Widows and Lloyds Banking Group in the UK and to suggest otherwise is not credible,” he said.
“As a result, Scottish Widows and Lloyds Banking Group had the right to terminate the contracts with Standard Life Aberdeen and we acted accordingly by serving notice on February 14.
“In any event, management of the funds in question would have ended formally under the terms of the contracts in March 2022.”
The spokesman added that the business, which plans to terminate the contract in February 2019, is “confident of our legal position”.
Under the terms of the dispute resolution process detailed in their contract the businesses are now engaged in negotiations about how to proceed.
If Scottish Widows decides to press ahead with finding a new fund manager it is likely that Standard Life Aberdeen will seek compensation for the period between February 2019 and March 2022. This could be based on the £130m annual management fee it receives from Scottish Widows.
Read more: Zombie firm Phoenix commits to maintaining Standard Life workforce
Meanwhile, Standard Life Aberdeen is pressing ahead with plans to sell the bulk of its own pensions business to zombie-fund consolidator Phoenix Group, in a deal announced a week after the Scottish Widows news broke.
Standard Life Aberdeen will receive a 20 per cent shareholding in Phoenix as part of the deal and will continue to manage the £150bn of assets invested in its funds via the pensions business.
Despite this, Standard Life Aberdeen co-chief executive Martin Gilbert said when the sale was announced that it would allow the firm to “have a future discussion with Widows”.
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