Nearly done with January. And breathe.
They – whoever ‘they’ are – say it’s darkest just before the dawn. This isn’t true – it’s coldest just before dawn; the lighting state is influenced primarily by lunar phase and urban light pollution – but it’s a useful way of saying that you shouldn’t be downhearted; that the problems you are having now will pass and soon. With yesterday’s news, we could all do with that.
It’s also an exhortation to take a longer view of what’s going on, and that’s a worthwhile thing to do in lots of ways. I’m reading a book at the moment – I know, right? – by trendy maths geek Tim Harford about how to deal with statistics. It’s very good, and one of the very goodest bits is a wee thought experiment where you look at live news and see what’s occurring. Then you look at the paper the next day and see how much of the live news made it in. Then you look at a weekly digest (hi!), and eventually a monthly and annual digest, if you can find one.
Now imagine a five-, ten- or even hundred-yearly digest. What from our sector would make it into a fifty-year financial services roundup, do you think?
It’s with that kind of view that I try to approach hot news about mergers, disposals and acquisitions in this business we call show. So when I’m thinking about the news that Epiris is pretty close to inking a deal to buy Nucleus – a nice scoop by James Fitzgerald – I try not to spend too much time in the tick-tock of the bidding process, or even what the price is. In this case, if Epiris does do a Nick the Greek we’ll likely be seeing two platforms brought together to form a more perfect union. That will have lots of implications, not least for the people in James Hay and Nucleus, and we hope for smooth sailing for them in the short term.
In our yearly or maybe five-yearly digest, I think we’ll say that irrespective of the bumps along the way, Epiris needed to do something to repatriate James Hay away from the systems and processes it has in place at the moment. If we look at how much it costs to replatform a business from the ground up, you can pretty much buy another provider with a fully-functioning instance of (in this case) Bravura’s Sonata technology for the same or less. Then you’ve got the migration costs, but you’d have them anyway. So that makes sense; the ‘vanilla’ JHP business goes to a newly-expanded Nucleus (whether it keeps the JHP name or not) and the tricky SSAS business is hived off to the side, probably on Delta’s SSAS technology which conveniently was acquired by Bravura last year. So the strategic fit was cool. I think we’ll say that none of it was smooth, that both Nucleus and JHP supporting firms found it challenging, but if we’re looking from five years out, the journey did end, the dawn did come and this too did pass.
If we zoom out to ten or twenty years, the story is surely more about the time that private equity came a-calling to the long-term savings and investment sector. What it found when it backed the money truck up to IFA firms and those providers it could reasonably consume was that this isn’t so much an investment sector or a technology sector as it is a people sector, and it’s very hard to get people to change. This is true whether they’re advisers or clients. They also found that things are complicated for a reason and that profits come in time but often take a lot longer than you think they will, which is why actuaries ever had a job in the first place.
Anyway, we wait to see and of course we will get lost in the tick-tock once the announcement happens. I’m not sure how effective Epiris would be as owners – not much has happened at JHP in the last couple of years – but this probably resets the clock for them and so the race will be on to tidy everything up and get a saleable entity in shape for relisting or disposal in (let’s guess) 2025 or 2026.
EXTRA SHINY GEESE
Also important to view with a long lens is the current stramash / bunfight / bandwagon-jumping-frenzy around ESG. As you may know, the lang cat is launching our first ever ESG paper tomorrow. It’s called Crossing The ESG Event Horizon: An Adviser’s Guide and it tries to do exactly what I describe above – take a more measured view of where we are and what the issues are standing between investors and investments that correspond to whatever they think ESG is.
Steve Nelson, the report’s author, gets ripped into the fund management sector – it’s rushed to doing what it always does, which is to try and manufacture as much stuff as possible and hope that some of it sticks. This is unhelpful, as is the pesky concept of investment suitability and risk tolerance which dictates that even the keenest Gaian shouldn’t be putting all their pension into a UCIS focusing on mounting tiny solar panels on the back of goats, or whatever. Anyway, we cover five key problems in the paper and try to suggest ways to cut through it all.
There’s an online roundtable launch event tomorrow at 10am which is free (as is the paper) thanks to the support of Schroders and you are both welcome and encouraged to come along. On the money will be Steve, Jeannie Boyle from EQ Investors, Sheila Nicoll OBE from Schroders and Stephen Mitchell from FE. Our chair is award-winning journo Cherry Reynard.
It’ll be 45 minutes of ESG goodness and there may or may not be geese. There’s also no HomeGames this week as we didn’t have the energy to do both. Again: sign up here. But if you can’t make it, the lang cat’s YouTube channel will have it for posterity shortly after.
- Quarterly bleat time – please would you take 4 minutes to tell us how your platforms are serving you? We are short of responses for a few platforms this time, so if you’re an IFA or paraplanner and can spare us a moment we would massively appreciate it. You can find the newly-shortened survey here.
- Good news for the stranded investors in Liberty SIPPs yesterday. Hopefully the beginning of the end of a sorry saga.
- Talking of sagas, the Quilter Great Migration is nearly done. This is one that really would turn up on the five-year digest. But hopefully a good ending is in sight now.
- And your music choice is from the lang cat’s nominative godfather, James Yorkston. He has a new record out called The Wide, Wide River which is a thing of great beauty; do buy it from your local independent record shop or direct from him if you can. Here’s There Is No Upside from that record – do enjoy. And if you do, Tom Robinson did a big special on Jamesy the other day and you can listen to that here.
See you next week.