Lighthouse Group plc (LON:LGT) Chief Executive Officer Malcolm Streatfield and Tavistock Investment PLC (LON:TAVI) Chief Executive Officer Brian Raven caught up with DirectorsTalk for an exclusive interview to discuss their strategic relationship.
Q1: Congratulations on your strategic relationship between Lighthouse Group and Tavistock Investments. Before we talk about the announcement, if we could just turn to Brian.
Brian, can you first tell us a little bit more about what Tavistock Investments do?
A1: Tavistock Investments is an integrated financial services group, by which I mean that we have both advisory business and an investment management operation. We’re a lot smaller on the advisory front than Lighthouse Group, we have 185 advisors who are a combination of self-employed and employed people. We have an investment management business called Tavistock Wealth which is really the main focus of the business mode.
So, Tavistock Wealth began life in October 2014, we launched a range of model portfolios of centralised investment proposition and from that standing start, we’re now running about £1.2 billion of assets. We do that through a range of UCITS funds so UCITS being the European regulatory gold standard, we have a range of UCITS funds and we select from those to construct a progressive range of model portfolio to suit the needs of individual clients.
Q2: Malcolm, how is Tavistock going to further develop the Luceo Asset Management range of investment solutions?
A2: As listeners will recall, the Luceo range was launched in late 2016, we recognise that we need to bring the Luceo range forward and with the assistance now of Tavistock, we’ll be able to augment our range particularly by the introduction of the very clever capital protected range that has been developed. We look forward to putting that into the Luceo range for us.
These sets of funds, we recognise, are going to be particularly attractive in the retirement space, an area that we do a fair amount of business with.
Plus, they have developed, not yet launched, smartphone technology which I know will be of interest to our affinity group clients who, as you know, run into the millions of people and we won’t be accessing all of those on a face-to-face basis. So, it would be very very good to be able to have technology that would be able to host these funds and be attractive to the end-user which would be the affinity members.
So, all-in-all, I think there’s a lot of positive stuff here, that working together collegiately, we can put in front of an ever-increasing number of customers and a very positive range of Luceo solutions.
Q3: What will this strategic agreement mean for Lighthouse’s advisers and for your customers?
A3: I think in terms of our advisors who have embraced the Luceo range that we launched in 2016, this immediately augments what they have to offer their clients, a range of good quality investment solutions that under the Luceo range had the oversight of the Lighthouse Investment Committee to benefit the clients. Our clients get access to this quality range of product that will be an enhanced level of oversight to the funds.
Our mantra has always been that these funds will always do what they say they’re going to do on the tin and I think Tavistock have evidenced that they’ve created a very good quality range of funds, in particularly enhanced recently with the capital protected range. We think we cleverly tick the box that says these funds will actually do what they say they’re going to do on the tin.
So, we believe our advisors and our clients are going to enjoy the experience of being able to recommend these funds.
Q4: What can investors expect to see in the next 12 months coming out of this relationship?
A4: I think, for Brian and I, it’s early days but we’ve recognised a series of synergies that we could potentially work together upon starting with, obviously, the current range of Acumen funds that Luceo will embrace. Indeed, as more fund opportunities present themselves, I think we’ll be working more collegiately to develop those so I’m looking forward to that.
Of course, we are two groups that have all sorts of synergies on other levels so I’m sure as we deepen our relationship and talk about these things, there may be more things that we identify as we go forward that we can work jointly together on.
So, this is the start of what I hope will be a very positive strategic alliance that runs for a very long time.
Q5: Brian, you confirmed the raising of £1.25 million this morning, what will you be using the proceeds of the placing for?
A5: Essentially two things. One, the raise facilitates us being able to replace a relatively expensive debt facility with a much more economic one so in order to avoid shareholder dilution when we affected one of our acquisitions a little under 3 years ago, we put in place a £2 million debt facility which we’ll be replacing now we’ve enhanced our working capital position by £1.25 million.
The other aspect is that just enables us to strengthen our regulatory capital position as we grow the business. Like Lighthouse, we’re expanding fairly quickly and we’re prudent gatekeepers of shareholder interests so it’s really about housekeeping rather than anything else.
Q6: What was your rationale for forming the strategic partnership with Lighthouse?
A6: Well, without repeating some of the things Malcolm has said, I think this is genuinely a case where one and one equals more than two, there’s a lot of potential synergy. We have a successful investment management business, we like the Lighthouse Group operation, we’re very happy to work with the Luceo Asset Management team and enhance that range of products. We’re fairly innovative so the capital protected products that we launched a few months ago, with Morgan Stanley, are really dealing with the challenge of providing a level of guarantee to investors in a different way through the use of put options, I believe that those are going to be extremely successful, the market response to them already has been extremely positive.
So, it’s about distribution really, working together, we enhance the Luceo range, we’re able to target as Malcolm said through smartphone app in only a few months’ time to the 6 million individuals who, if you like, sit at the other end of the affinity relationship that Lighthouse has. Lighthouse is clearly the market leader in terms of affinity so that’s an aspect that’s important to us.
In terms of looking to the future, we’re effectively trebling our advisor input in terms of areas that interest their clients in terms of future products. So, as I said, we’re innovative, we’re interested in building products that satisfy investor needs and areas of investor interest and I think that with the scale of our combined advice teams, we’ll have an awful lot of effective input that will enable us to do.