When I first became involved with the wild and wacky world of financial services, and the life and pensions part of it in particular, one of its most apparent components was a group of firms know as the “Scottish offices.” The core Scottish membership consisted, as far as I can remember, of Scottish Amicable, Scottish Equitable, Scottish Life, Scottish Mutual, Scottish Provident and Scottish Widows, although there were a couple of not-so-Scottish-looking offices on the periphery (most notably Standard Life).
Innumerable market research studies told us that the word “Scottish” stood, above all, for two things: it stood for shrewdness, and it stood for prudence. These are of course very good and positive things in the world of life and pensions, so, all other things being equal, most consumers were happy when their financial adviser recommended one of the firms in the group.
Which makes it all the odder, really, that within a few months all but one of the names in the list will have disappeared. When Royal London applies its master brand across the businesses it owns and so disposes of the Scottish Life and Scottish Provident brands, the last Scotsman left standing will be a Scotswoman, if you see what I mean: Scottish Widows will be the last survivor, which I suppose is by definition what a widow is.
You might imagine that such a comprehensive Highland Clearance could only have happened on purpose, and you might even observe a plausible reason: could the catastrophic near-collapses of Scotland’s two major bank, RBS and Bank of Scotland, have caused a sort of negative-halo effect on all financial things Scottish, with slightly panicky knock-on consequences for other names including the “S” word?
Actually, I don’t think so. I think it’s mostly about the huge volume of M&A activity in the sector over a number of years, and the somewhat complicated motives of most acquirers when it comes to deciding what to do with the brands they’ve acquired.
In most M&A activities within the consumer economy, of course, brands are among the most valuable assets on offer. When, say, Diageo bought Guinness, or when Alliance bought Boots, dumping the acquired brands would have been unthinkable. Arguably the brands lay right at the heart of what it was that they’d actually bought.
It’s a reflection of the failure of most financial services businesses to build brand value that on the whole, most acquirers dump most acquired brands. One or two large, acquisitive businesses still tend to follow a house-of-brands approach, Lloyds being the most obvious example today. And from time to time an acquirer which generally favours a single masterbrand buys (or creates) a business with a brand which is too valuable to dump: HSBC maintains very few other brands but still finds room for First Direct, and the same can be said for AXA and PPP healthcare.
But the bottom line is that since I first encountered all those Scottish offices, they’ve actually all been bought – Amicable by the Pru, Equitable by AEGON, Life by Royal London, Mutual first by Santander and then by Royal London, Provident the same and Widows by Lloyds Banking Group. And among the acquirers, it’s only Lloyds who have decided that the brand they’ve bought is worth keeping.
If one of this not-so-magnificent seven was going to survive, it’s no great surprise that it should be Widows. For one thing, as I mentioned, Lloyds tends more towards the house-of-brands strategy than any other major group. For another, although I’ve always doubted wihether Scottish Widows could really be said to have built a distinctive brand, it could certainly be said to have established by far the best-known of the Scottish names. And for a third, the name hasn’t become tarnished by some of the scandals and bad judgments which have afflicted some of the others – Amicable with low-cost endowments, Mutual with structured products, Provident with years of poor decision-making which saw it fall steadily, at least in terms of intermediary perceptions, from the top to the bottom of its specialist protection field.
Still, given the mild but undoubtedly real consumer preference for firms with the word “Scottish” in their names, and given the apparent difficulty in building any other kind of meaningful differentiation into the way life and pensions companies are perceived, it’s still kind of surprising that the “S” word is an asset that all the acquirers except Lloyds have decided they can do without.
Of course back in the days when there were seven Scottish life companies, I suppose the most obvious drawback was that there were, indeed, seven. The appearance of the “S” word differentiated you from most of the market, but you still shared those perceptions of shrewdness and prudence with half-a-dozen others.
That being a drawback that’s now largely gone away, I reckon that provided our tartan-clad friends north of the border don’t do anything too silly in the forthcoming referendum, there’s only one obvious place to launch a new life company in the next few years..