Thinking ahead. The value add that a partnership approach can provide

Wealth Management and Private Banking

09 June 2022

diversityGrowthInnovationPartnershipStructureWealth Management and Private BankingWealth Management and Private Banking

Expert: Rob Hall, Wendy Strutt, PGIM, Amanda Cain, Edward Jones Moderator: Caroline Burkart, Aon

Headline Finding 1:  PGIM Orientation: Raising Awareness in the UK

PGIM is the global investment management business of US-based Prudential Financial, Inc. and the world’s 11th-largest investment manager, with more than $1.5 trillion in assets under management. While the firm is established and well-known in the US, it is actively raising its profile in the UK and throughout Europe as it expands in the region.

  • This panel discussion highlighted the long-term strategic partnership between PGIM Investments, PGIM’s global distribution business, and Edward Jones, a Fortune 500 investment firm with nearly 19,000 financial advisors managing $1.8 trillion in client assets. Panellists included Wendy Strutt and Rob Hall from PGIM Investments and Amanda Cain from Edward Jones. Since 2011, PGIM Investments has been committed to helping Edward Jones deeply serve its clients through personalized strategies, dedicated resources and customized marketing materials.
  • What are the benefits of a strategic partnership?
  • Rob Hall, Head of UK Wholesale at PGIM Investments International, began the discussion by emphasizing the value of strategic partnerships in a consolidating industry where the old distribution models are no longer working. While PGIM offers its partners active investment strategies in the pursuit of consistent outperformance, it also builds trust to help develop robust working relationships. These partnerships are not just the domain of large businesses, but can be built on many levels. Strategic partners can offer support far beyond investments, including training, technology and talent.
  • Can you describe Edward Jones’ vision and the role Amanda Cain plays?
  • In addition to helping clients achieve their financial goals, Edward Jones strives to have a positive impact on society and improve the communities where it does business. The company is transforming to achieve its purpose and is seeking partnerships to create additional value. While a strategic partner can create new value by offering products and services, it can also help support priorities and determine the best way to deliver them. Amanda’s role at Edward Jones is to identify these partners and manage the relationships.
  • What is Wendy Strutt’s key role at PGIM?
  • PGIM is known for its distinct multi-manager model, offering global scale and investment expertise across a broad spectrum of asset classes and investment styles. As Head of US Accounts at PGIM Investments, Wendy determines where strategic partnerships make sense. How can PGIM grow and also enhance its partnerships? Which firms have established priorities and a culture that align with PGIM, setting the stage for a successful partnership where both businesses can grow?
  • What do strategic partnerships mean for the industry?
  • For PGIM, it is about having the resources and strength to be a better partner as it seeks growth opportunities. There are tremendous benefits to focusing on key areas. When PGIM decides where to focus from a partnership perspective, its executives can make effective decisions on joint initiatives. With tremendous ongoing change in the industry, PGIM and its partners must work together smoothly.
  • When one delegate asked if strategic partnerships are formal, documented, relationships or looser arrangements, Wendy responded that they tended to be more formal in the US. Amanda confirmed that partnerships are formal at Edward Jones, enabling them to work at an elevated level with high expectations. Both parties review and discuss insights together to achieve a mutually beneficial connection.
  • Wendy pointed out that the UK is a very different market with a slightly different progression, but that strong partnerships are the goal. PGIM has strategic partnerships in the UK and elsewhere in Europe, and is looking for more opportunities in that region and in Asia. Informal relationships can evolve into more formal partnerships if all is working well.

Headline Finding 2: Structuring an Effective Partnership

  • Edward Jones structures its partnerships by looking for high-quality investments and operational processes, a strong culture of compliance and meaningful support of branch teams ultimately to support end clients. In addition to products, Edward Jones looks for strategic partners to provide education, insights and personalized support to branch teams. Questions to ask include: What are client needs? and How can the two firms partner to best deliver on those needs?
  • PGIM prefers to serve fewer partners more deeply, allowing it to be more agile and adaptive. The industry has been slow to adapt, and partnerships are typically delivered to institutional investors.
  • One delegate attending the panel said they had many strategic partners, primarily in the FA space, working to offer products through technology. This tried and tested process was really born in the UK out of aggregation. The starting point was small FA businesses, without much influence in the marketplace, that received generic products. Through the delegate’s business, they could aggregate investments, which is slightly different to the wealth management community where less-generic products are more suitable. In the UK, it is more about the aggregation of processes.
  • Another delegate said his bank has customers in 10 different European countries and would value distribution capacity. He asked if PGIM offered these capabilities and if it could support such complexity. PGIM responded that it has a track record of investing ‘ahead of a partnership’. If it makes sense, PGIM can make the necessary investment to show capability. Edward Jones confirmed PGIM’s capability in this area. Over the years, PGIM evolved from simply an asset manager with products in the Edward Jones line-up, to an important partner supporting the Edward Jones branch teams that also helped launch a new insurance product. PGIM also now supports Edward Jones’ branch teams with practice management. PGIM is building out its capabilities in Europe and sharing ideas with potential partners there.
  • Another delegate wondered why a firm as large as Edward Jones needed a partner like PGIM at all.
  • In Europe, it was pointed out, firms work with open architecture to deliver the best outcomes for clients, so how does that work with a strategic partner? Amanda responded that Edward Jones has many strategic partners with different products, so they don’t favour one manager over another. It’s about looking for the best outcomes for the client and the firm. One challenge Edward Jones faces is how many resources to retain in house, considering the time, cost and expertise required. The firm tends to rely on asset managers for more specialised products. It also reviews all the pros and cons of an initiative, where its resources might be constrained, and the maintenance required. Sometimes, forming partnerships is more efficient.
  • PGIM understands that it is competing with fiduciaries. However, when its clients need certain resources, PGIM expects to be included in any search those clients conduct. PGIM doesn’t expect to win all searches, realising that clients’ interests come first.

Headline Finding 3: Delivering Innovative Technology to Improve the Client Experience

  • Edward Jones recognises that client expectations are changing. It wants to maintain deep-rooted relationships with clients, and technology can help the business be more efficient and effective. With clients looking for customisation, Edward Jones sees it as critical to utilise technology that benefits in-person relationships. The firm, acknowledges the importance of working with partners to create the ideal experience that clients expect.
  • One PGIM tech acquisition was client customisation for the US market that focused on after-tax performance. This was customised tax management expertise, and PGIM understands that it needs to develop new capabilities at the same pace as the broader market.

Headline Finding 4: Investing in Technology to Drive Change

  • Wendy explained that PGIM recognises the need to spend money to drive change. The firm has a strong partnership with a US Family Office business around a reporting capability. Because the software for this capability is too expensive for the office, PGIM realised it had to spend the money to develop the software properly. The financial services industry has under-invested in technology, and needs to provides services to clients in different ways. One delegate observed that private investments are behind the curve. Asset allocations to private markets are around 20% and moving higher. UHNW want individual PE holdings, but for affluent investors, they can do this through pooled funds. PGIM agreed, and they do structure a product for UHNWs, but are also investing in putting core capabilities into different envelopes and establishing more liquid vehicles for lower value clients. They observe that even UHNW and HNW sometimes prefer this liquidity for some portion of core exposure.  PGIM operates in a crowded marketplace but offers an established private equity platform, although it needs to structure investments in an accessible way to the wider market. A delegate said that most PE offerings tend to be very US-centric, but more exposure is needed in Asia and Europe. PGIM confirmed that it offers regional-specific products.          

Headline Finding 5: Sharing Talent Management Resources and Addressing Diversity Goals

  • The panellists addressed a question about whether their firms share any resources on talent management capabilities. PGIM shares talent best practices across its functional areas. Both partners review best practices around transformation, diversity, equity and inclusion (DEI), human resources, and adapting to employee needs in the best possible way. However, expectations change, and partners need to be aligned on changing goals.
  • One example is diversity, which is often a stated goal for companies but challenging to implement. Edward Jones emphasized that the industry must take a serious approach to investing in diversity; otherwise nothing will change in the next 10 years. It’s important to collaborate and agree on industry standards. Some firms in the US are pooling resources to address root causes affecting the industry.
  • Senior leadership plays the most important role in achieving diversity goals. It’s challenging because diversity currently is lacking in the industry. Firms in the industry need a significant and diverse profile of employees, and diversity initiatives need to begin with schools and universities.
  • While Edward Jones has addressed diversity historically, it is now talking about its goals publicly and recognising how important it is to start having these conversations. Firms in the industry and their vendors are beginning to hold each other accountable, and the focus is how to encourage a diverse community.
  • To finish up, the panellists were asked if PGIM and Edward Jones measured the success of their partnership on any factors beyond growth of assets under management (AUM). PGIM said AUM growth is significant, but the other factor is the alignment and cultural fit between the two partners, which needs to work. It’s a soft measurement, but very tangible when the fit is good. PGIM is currently exploring partnerships like this in Europe. Its goal is to help serve clients of new partners more deeply, as it has with Edward Jones over the past 11 years. Edward Jones’ final insight was that a good partnership should be strategically aligned, but at some point the strategies may change, which is OK. You need to be comfortable knowing that a partnership may simply dissolve as strategies change.
  • Once again, the goal of this panel was to educate attendees about PGIM, its long-term strategic partnership with Edward Jones, and how these relationships can help businesses grow together by combining their mutual and complementary strengths.