“Petit a petit, l’oiseau fait son nid.” Little by little the bird makes its nest, declares the old French proverb.

Yet it seems for the Paris-based AXA Group the expectation for the UK wealth arm of its flock was to build its home somewhat faster after announcing plans it is seeking suitors to buy the business.

Being put up for sale, the division which includes the Elevate platform, Sipps, onshore bonds, corporate pensions, and its multi-manager arm Architas, will likely follow its life and pensions cousin that was sold for £2.75bn in 2010.

The proposed sales reinforce the challenges that have beset many UK financial services businesses since the financial crisis.

Despite buoyant markets, regulation (RDR), price compression, and a trend, mirroring many other industries where a handful of whales that take most of the krill and leaving the rest of the pack unable to properly grow or able to reach critical and sustainable mass.

AXA Wealth, if you take the example of Elevate, has batted on admirably since RDR was introduced and has grown to over £10bn of assets.

However this is a market in which one of the whales – cofunds – with six times the assets also finds itself in the shop window after L&G put it up for sale a mere two years after fully acquiring after boosting its 25% stake to 100%.

But the tech-spend required to retain its status as a whale turned out to be too much for L&G to take on.

There have been a number of winners in the UK off the back of RDR, Hargreaves Landsdown and St James Place to name just two.

In this market unless you have a killer proposition that is clearly differentiated or true scale that allows firms to dominate on price or distribution and strong buy-in/support from various distributors you’re going to struggle.

The plight of the middle-of-the-pack (the averages) is arduous.

Some businesses (Standard Life and Old Mutual) are looking to protect against the fate now befallen to AXA UK – by full vertical integration. Yet this goes against the spirit of RDR and seems to take everyone a step backwards, even if it’s been structured in a way that doesn’t over step any regulation no-no’s!

Distribution remains golden, and despite the growth of other non-intermediated channels… robo, direct, workplace etc. financial advisers are still a dominant and powerful channel – even though most are knee-deep in regulatory and compliance paperwork most of the time!

Meanwhile for AXA Wealth UK, relative to its immediate siblings – AXA’s international businesses – it is the smallest member of the family.

Of the group’s €1.9trn in underlying earnings for life and savings in 2014, the UK chipped in a paltry €27m, compared to €421m for France, €513m for the US, and €230m for Japan.

AXA bought Winterthur Group and advisory firm Thinc Group in 2006, and in 2010 offloaded much of its life and pensions business to Resolution to focus on the apparently less costly and capital-intensive wealth management and savings business.

 

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