Aviva plc (AV) Earnings Call Transcript & Summary

Okay. Good morning, everyone. I guess it's been a busy morning for you so far. Thank you very much for joining us today. It's absolutely great to see you here. When we speak with investors, Wealth is one of the areas that people have been asking to hear more about. And we're excited to give you more insight into this fantastic business, our growth ambitions and why it's particularly important for the group. So I'm joined here today by Doug Brown, who is the CEO of our Insurance, Wealth and Retirement business; and Michele Golunska, our MD of Wealth and Advice. And they're going to take you through the performance of and the plans for our wealth business and show you why we are so excited about our future. And of course, there will be plenty of time for Q&A at the end. But before that, I wanted to give you a quick overview of just how important Wealth is to the group, and the possibilities that it offers us. So without further ado, let's crack on. So simply put, Wealth is one of the biggest growth opportunities in the U.K. The market is set to nearly triple to GBP 4.3 trillion in the next 10 years, delivering double-digit growth year-on-year. This is a phenomenal tailwind for us, and being a fee-based, asset-backed business with high returns, the financial and capital-light characteristics of Wealth are highly attractive. And Aviva is extremely well positioned to capitalize on it, perhaps better placed than anyone else. As you'll see, our workplace and adviser platform businesses are already exceptionally strong. And we're actively investing to round out our proposition with advice and direct wealth to take full advantage of the enormous opportunity in our customer base and the open market. With over GBP 147 billion in assets, we are already a leading player, and we continue to demonstrate resilient asset and profit growth despite a challenging economic backdrop. Growing our Wealth business is also central to the broader Aviva strategy. It's a key driver as we focus on growing the capital-light businesses. It's a core customer acquisition engine for the group with over 5 million customers growing by nearly 1 million customers over the last 3 years. It gives us a great opportunity to deepen our customer relationships and grow our leading Retirement business. And of course, while Aviva Investors is not the focus of today's presentation, it gives our Wealth business a real competitive edge with its focus on ESG and sustainable investing. So that's quite the price to go for, and that's why we're focusing on growth in Wealth. We've set ourselves big ambitions, and I'm confident that we can deliver them. I'm now going to hand over to Doug, who will set out why we are so convinced about the prospects of our Wealth business in future.

Thanks, Amanda, and good morning, everyone. It's great to be here today to talk about our Wealth business. Let me start with the key highlights. As Amanda said, Aviva already has a strong and growing Wealth franchise, and we are a top U.K. player by assets and net flows. We're very well positioned with market-leading workplace and adviser platform businesses, and we're investing in growth opportunities across advice and direct wealth. All that combines to underpin our big ambition to grow to over GBP 250 billion in assets and generate at least GBP 280 million in profit in 5 years. To see how we're going to do just that, I'll start by breaking down our Wealth franchise in more detail. Our Workplace business is a genuine standout market leader. We hit the fantastic milestone of GBP 100 billion in assets this year, and we're nearly 1.5x larger than our nearest competitor, and we're growing rapidly and profitably. And with 4.4 million customers, we're a key source of customer opportunities for other Wealth segments and the wider group. Our adviser platform is at scale with GBP 39 billion in assets and is consistently outgrowing the market. We are in the top 2 for net flows, and our compelling proposition means that we can accelerate the strong momentum we have created. With the acquisition of Succession Wealth last year, we are rapidly scaling our advice capabilities. And we are already seeing some great signs of progress here, including recapturing customer outflows and driving positive flows on to our adviser platform, and we are launching a direct wealth and hybrid offering to round out our proposition for customers. So we're in a great position as a leading player in a growing market. And crucially, this market growth is underpinned by fundamental societal trends. As you know, the shift from DB to DC and the introduction of auto-enrollment have accelerated workplace DC pensions. More than that, there is still a substantial and growing pension savings gap. With an aging U.K. population and material intergenerational wealth transfers over the coming decades, both direct and advice solutions will be critical to ensure customers can manage their wealth effectively. And these structural trends are driving growth across the whole spectrum of Wealth, and the segment we are focused on is forecast to grow by double digits over the next 10 years, nearly tripling in value from GBP 1.6 trillion to GBP 4.3 trillion. This gives us significant opportunities across the board. With regular contributions through auto-enrollment, the workplace market is expected to continue on its highly resilient growth trajectory. The advice segment is also forecast to see double-digit growth, especially with a material and growing advice gap of over 13 million people in the U.K. And in the direct-to-consumer space, advances in technology, guidance tools and investment solutions will continue to drive demand. Overall, as I've said, we're very well positioned, and there is a real opportunity for us here to deliver double-digit growth. Importantly, we're not starting from scratch. Aviva is already a leader by assets and net flows when we look across the retail and workplace U.K. Wealth segments. And Aviva's unrivaled U.K. customer franchise gives us a true competitive advantage. These customers, 6 million of whom are mass affluent, already know Aviva, they trust our brand, and they represent a significant growth opportunity for us. So we are laser focused on recapturing more of the GBP 6 billion in annual outflows, and we are making good progress here. And with more than GBP 800 billion in investable wealth across Aviva's customer base, there's a lot more to go after as we aim to become the go-to lifetime financial partner for our customers, helping them to grow their assets. We are investing to capitalize on the growth opportunity in Wealth by creating a customer-centric proposition that only Aviva can deliver. We have strong foundations already in place with our leading workplace and adviser platform businesses. And by adding advice and direct wealth capabilities, we can now serve the full range of customer wealth needs from a workplace pension in their first job right through to retirement, and all with seamless customer experience. We have the advantage of an in-house asset manager that is in the top 3 globally for responsible investment, and our strategic choice of FNZ technology across our wealth businesses gives us real operating leverage. In this presentation, we'll give further insight into the strength of each of our businesses and also how they come together for our customers. It's this customer-first approach that makes Aviva really stand out. And that, more than anything, will see us deliver on our big ambitions. So as I've said and as you can see on the left, we are already delivering consistently strong performance with double-digit growth in assets and profits year-on-year despite recent market headwinds, and we are thinking big for the future. Over the next 5 years, we aim to scale up our Wealth businesses to over GBP 250 billion in assets, growing at more than 10% per annum. Workplace and adviser platform will, of course, play a key role in continuing with their growth momentum. And our investments in advice and direct wealth will materially increase their growth and margin contribution over time. And as we scale, with operating leverage and higher margins, we will drive a material increase in our profit contribution to at least GBP 280 million per annum. This is over 15% growth per annum. Now these are big ambitions supporting group capital-light growth, but we're very confident we can meet them. And realizing this ambition will ultimately come down to how we live up to our promise to our customers. And we have always prioritized delivering the right outcomes for our customers. For example, we pass on all the benefit of interest paid on cash balances. We don't take a proportion of the gain on our other platform assets, and we don't believe cash should be any different. We also don't have any early exit charges. This means our charges are as transparent as possible. With regular reviews of our fee structures and investment solutions, we are confident that we offer excellent value for money across all our wealth businesses. And we're there for our customers in other ways, too, from communications and vulnerable customer support to helping our intermediaries ensure that products provide value for money. And it goes without saying that we are compliant with the Consumer Duty July deadline set by the FCA. So to deliver for our customers and on our financial ambitions, we have four priorities to share with you today aligned to our component businesses. Michele will cover how we will continue to grow our workplace and adviser platform businesses, and the strong progress we are making in advice with Succession Wealth. And I will close with our ambitions for direct wealth, how we are bringing it all together for our customers and the difference our approach makes to real lives. So Michele, over to you.

Thanks, Doug, and hello, everyone. Let's start with our standout #1 workplace business where Emma Douglas and her team have been doing amazing things. The numbers pretty much speak for themselves. More than GBP 90 million profit last year with almost GBP 6 billion in net flows despite a challenging macroeconomic backdrop. And this year, we've reached GBP 100 billion in assets, winning over 300 schemes already. This business has clear strengths. We have highly scalable operations and technology, and future growth is all but locked in with the highly resilient net flows we are securing. With 4.4 million customers, we are also critically important for the group, as you can see on this next slide. The business is a key customer acquisition engine with members of all ages and earning levels, and the customer base continues to grow at 7% year after year. With the average career now lasting over 40 years, we're uniquely set up to attain those relationships for the long term, serving needs throughout the full customer life cycle from the first penny earned to the first home brought through to retirement and beyond. In fact, over 30% of our workplace members have two or more Aviva policies already, and we believe that's just the start. Workplace is highly intermediated. So we work very closely with corporate EBCs and IFAs to support 21,000 U.K. corporates from some of the largest global brands to some small schemes with fewer than 100 members. We're the only U.K. provider offering the full spectrum of corporate products across wealth, insurance and retirement, and with the excellent relationships we have, more and more corporate customers can opt for more and more breadth of product and services. And with our award-winning My Future Focus default fund, provided by Aviva Investors, we're capturing 56% of flows. The opportunity in workplace is enormous, and the market is uniquely attractive. In the decade as auto-enrollment was introduced, the market has more than tripled in size, and with extremely resilient market growth through the constant flow of employer and employee contributions, is expected to triple again, reaching GBP 1.3 trillion (sic) [ GBP 4.3 trillion ] over the next 10 years. Last year is testament to this resilience with workplace assets holding flat despite global markets falling more than 10%. Regular contributions in workplace are as near to a guaranteed cash flow as you can get, effectively locking in future growth. 95% of new contributions are from existing employees, reducing reliance on increases to the workforce. Scheme retention across the market is also high with many remaining with the same provider for over 10 years, especially beneficial for a business like Aviva with such a highly successful track record in this area. And finally, there is significant opportunity for further upside. With today's pension savings gap of GBP 6 trillion, estimated to reach GBP 25 trillion by 2050, we are on hand to address the growing issue of income adequacy in retirement. And the government is already looking into this with consensus across many experts for higher auto-enrollment rate of 12% to help solve the pension savings gap. As Doug and Amanda have said, we are ideally positioned to take full advantage of these opportunities. As you can see, we have almost 1.5x the assets of our nearest competitor, and this scale is a true competitive advantage. But it's not only scale. We also have strong penetration across all market segments, with shares of 20% and above in medium, large and mega size schemes. We have a fantastic waterfront of clients, serving needs from the smallest employers right through to the largest brands, which embeds a diversification benefit into our business. When looking at contract type, we are the clear #1 in contract-based schemes, the largest segment in today's market. And we've been enhancing our Master Trust proposition as part of the group's GBP 300 million investment for customer and growth, which is delivering strongly and so has outgrown the market by 2 percentage points in recent years. So we have strong market position and we are understandably very confident for the future. A key reason we have that level of confidence is because we have such a great offering for employees. Our Workplace app, which launched back in 2014, is highly rated with a 4.3 star rating, and has 2 million registered members. Customers are increasingly conscious about where they invest their money, and we have leading ESG investment solutions through Aviva Investors. We've been innovating for our customers, launching a leading pension tracing solution and developing a non-advised guided retirement pathway. Doug will talk more about these innovations later. And we are, of course, a natural starting point for those requiring financial advice. We're also #1 for employers and intermediaries. We hear time and time again from EBCs and corporate IFAs that Aviva's trusted brand makes us a clear provider of choice. We have automation across the board from a seamless onboarding experience to giving customers the ability to manage their plans in a way that suits them. We offer a truly leading customer experience. Our Net Promoter Score of plus 81 on our My Money platform is stronger than most leading global brands. And we're a standout choice for employers who are increasingly partnering with sustainable, climate conscious partners. We're covering all the bases, hitting every mark and delivering what our customers want. And this is driving our 70% new business win rate and 99% retention rate. So I've talked about how we're showing up outside the business. Under the bonnet, it's a scalable operating model. Our technology architecture combines in-house development of our app and third-party solutions. Our Salesforce partnership gives us leading relationship management technology. And with FNZ as a strategic partner, we have a scalable investment platform. And we've been automating to drive even greater operating leverage, achieving a near 100% straight through processing for seamless small scheme onboarding, and enabling our customers to process transfers in from other pension pols entirely in app. Finally, we have the added benefit of Aviva Investors managing our assets. So how does all this translate into the financials? As I've said, one of the great strengths of our workplace business is that it can deliver strong net flows year-on-year, well insulated from external market conditions. As you can see on the left, even the substantial negative market impact last year was largely offset by regular scheme contributions and wage inflation. We've already seen a significant uptick this year, exceeding the fantastic GBP 100 billion asset milestone. All of this plays out in our growth momentum, which becomes clear through our P&L. Revenues have been growing despite some margin compression in a highly competitive market. In expenses, strong cost control and our scalable operating model have been driving operating leverage. And as a result, profit has been growing very strongly at 20%. So that's our workplace business. We are incredibly well positioned, fast growing and profitable. And I hope you'll agree, we have every reason to feel very confident about what the future holds for us. As we move to our adviser platform business led by Roger Marsden, it's a very similar story of strong performance. Here, we've been consistently outperforming the market, taking market share in each of the last 4 years, quarter after quarter, with a regular level of growth that has been entirely organic. And our assets have been growing double digits despite a very challenging market backdrop. We're consistently a top 2 player by net fund flows. We're supporting adviser and customer needs with a leading proposition and unique ESG capabilities. We have a highly scalable platform underpinned by a hybrid technology model. And we're on track to become a material profit contributor to Aviva's Wealth franchise. Looking at the market landscape, we are playing in the attractive platform market segment, where assets are expected to almost triple over the next decade to GBP 1.5 trillion. We are well placed to capitalize on several structural trends. Legacy assets, accounting for GBP 440 billion outside the advice market perimeter, are transitioning onto platforms, growing the size of our opportunity. We're supporting a shifting IFA landscape as firms consolidate into super firms through our leading platform capabilities and the development of our new asset transition capability. And with vertical integration of single-tie arrangements on the rise, we continue our success in the open market and capture more of the value chain in advice through our acquisition of Succession Wealth. In recent years, we have outperformed the market across all key metrics: Net flows, gross flows and assets. In no small part, the outperformance comes from the proposition that sets us apart from the pack. Advisers rank us as the #1 player in value for money. That doesn't mean we're the cheapest, we're not. It means we offer excellent value proposition with high-quality service and exceptional functionality. We are making it easier for advisors to partner with us, embedding automation across our platform from streamlined onboarding processes to bespoke tools for planning, investing and drawdown, and providing high-quality dedicated support through strong distribution and service teams. We offer a full suite of investment solutions, recently winning awards for Best Stocks & Shares ISA Provider, and leading platform for model portfolio services. We're always striving for more, delivering 120 improvements to the functionality and service on our platform since 2019. And our A-class classification from the independent rating agency, AKG, is a clear indicator of our strength. And we're delivering this in a way that is sustainable for Aviva, our customers, and yes, the environment, with unmatched ESG capabilities. Advisers can objectively assess client portfolios against ESG criteria and themes with our profiling tool. And our sandbox is a test area for them to create ESG portfolios from scratch or tweak their model portfolios. We also have a plethora of resources available with the latest expert insights and thought leadership. These unique capabilities are widely recognized, having won a European award for sustainable investing impact reporting. All of this combined under one proposition makes us the platform of choice for new business and #1 by adviser relationships. As with workplace, this performance is underpinned by highly scalable operations and technology, thinking not only of today, but also of our future ambitions. We have a hybrid technology model, optimizing for efficiency and productivity. Our user interfaces are developed in-house, giving us more control to cater directly to our adviser and customer needs. Aligned to workplace, we have strategic partnerships with leading third-party providers in FNZ and Salesforce. And our relationship with Wipro is driving material back-office process improvements in automation. And we have been selective with our integrations, choosing providers carefully to facilitate seamless interactions across our platform. Most importantly, we are operating under our target state architecture with implementation and migrations complete. We're already processing more than 75 million transactions each year with over 99% fully automated and have everything in place for strong future growth. So how does this all manifest itself into the financials for our adviser platform? Well, we're showing strong momentum, delivering double-digit revenue growth and strong net flows greater than 10% as a proportion of assets year after year, even with the recent market challenges, operating with leverage, opening the cost to income jaws as we further scale the business, and sustaining double-digit profit growth while continuing to invest in the business. And it's worth reiterating, we're not reliant on cash balances as a source of income. Just like with workplace, I'm really excited for the future of this business and have great confidence that we will continue to outgrow the market. Turning now to advice, where we are scaling up with Succession Wealth with James Stevenson and the team. The rationale here is clear. There is a growing customer need with a rapidly expanding U.K. advice gap of over 13 million people, an opportunity to stem outflows to competitors and a real benefit for us to capture more of the value chain. Aviva's research report on retirement in the 2050s showed that 73% of people retiring at this point would be interested in support to ensure they don't run out of money in retirement. To address this, we have a leading advice capability in Succession Wealth, an advice firm consolidator with 230 planners, over GBP 9 billion in assets under advice and 19 offices across the U.K. Our planners support over 20,000 customers in the way that suits them best, whether in their home, their local office, or virtually. And given the breadth of financial support provided, this is a strong and often lifelong trusted relationship. And our MoneyAge Award just last week for medium-to-large wealth management firm of the year is testament to the quality of our people and our offering. We're now a little over 12 months on since acquisition. And while it's still early days, we are making great progress. In the year since our acquisition, Succession Wealth have completed a further two acquisitions for more than GBP 1 billion of assets under advice and has begun its largest recruitment drive in over a decade, adding more than 70 new planners through a mixture of hiring, acquisition and the transfer of Aviva Financial Advisers. We now have 100 planners actively writing restricted advice. And we have also successfully piloted our customer engagement engine, generating 9,000 internal leads. These leads are particularly exciting. And we're now working to industrialize the way we connect our customers to the right advice solution. We've developed a customer engagement engine, leveraging artificial intelligence, behavioral analytics, and our rich data to identify high-propensity customers, respond to customer actions, and at the right time trigger highly personalized engagement. Customers are then directed to the right team or educational content, receiving the support they need for the future in the way that they want it. And alongside our existing engagement methods, such as referrals and contact center teams, this is already working. We're already achieving a 5% lead conversion rate, and we're striving for more. As a quick example, a customer recently consolidated 4 deferred pension pols with their Aviva pension and then invested the proceeds of GBP 400,000 into Aviva Investor funds with a drawdown portfolio. These early successes only strengthen our confidence, and we are on track to deliver our target return on investment from Succession Wealth acquisition in the medium term. Now moving on to the financials. As you can see, we have been resilient in a turbulent market with earnings largely flat in 2022 year-on-year, while continuing to provide excellent advice. And I'm really proud of how we have always been a choice for our customers, demonstrated by our 4.8 star vouch for rating. And we're building on these strong foundations. We have a new recently relaunched dual advice offering with planners offering both independent whole of market advice and restricted advice. For those unfamiliar with these terms, whole of market planners can use any platform on the panel and restricted advice planners are tied to our market-leading platform. The latter typically cater to more simple device needs with the average customer assets of GBP 200,000. And of course, we have the added benefit of our adviser platform, the platform of choice for the whole of market and restricted advice and our investment solutions to Aviva Investors, both of which enable us to capture up to an additional 50 basis points of the value chain. And we're excited to continue this momentum in Succession Wealth, aiming to grow to 500 planners over the medium term through M&A and organic growth. I'll now hand back to Doug to take you through the opportunity in direct wealth and how we're bringing it all together for our customers, and ultimately, our investors.

Great. Thanks, Michele. Right. So you've heard about the real competitive advantages in our existing businesses, and I'm going to finish on how we're investing to bring it together for our customers as a truly connected wealth proposition. With this proposition, Aviva will cater to lifetime wealth needs of our customers from pension auto-enrollment in workplace and early-stage investing right through to retirement planning and managing income in retirement. And we're doing a lot here. We're launching a differentiated direct wealth offering, which will sit alongside our workplace and advice and will round out our Wealth proposition. We're pushing the boundaries on innovation across all stages of the customer life cycle. And crucially, we're scaling up our customer engagement engine, which Michele has talked about, to engage our customers at the right time on their full set of wealth needs. And we are building the customer experience to enable customers to move seamlessly between our propositions. So where will this investment get us? Well, it's quite simple. Our ambition is to grow our customer base, increase the share of their assets, and retain them for longer. Let me elaborate, starting with direct wealth. As I've said, direct wealth will be a critical part of our proposition and a huge opportunity for us at Aviva. We already have an investment platform, but we are revamping our proposition around critical customer needs and a clear market gap in hybrid advice. Just to give you some flavor of what's to come. Central to this proposition is customer experience and the 360-degree view of customer wealth in a single screen, from cash, investments, and pension, to equity in home, vehicles and even jewelry. So customers can see all of their wealth in one place. We will also complement our advice capabilities in Succession Wealth by launching hybrid advice, giving our customers the full range of help and support they may require. And we have a complete range of investments and product wrappers. From leading ESG solutions through Aviva investors to risk-rated funds and DIY trading, with Joanne Phillips, Sarah Layden, and the direct wealth team, we are excited to be launching this new proposition early next year. So moving on to innovation. Let me give you a few examples of where we're really leading the way here. For early-stage investing, we have our award-winning Wealtify DIY investment platform. This robo-advice proposition provides tailored, risk-rated investment plans built and monitored by investment experts. It's highly targeted and is complementary to our other wealth businesses. In pension consolidation, we've developed a market-leading solution in partnership with Fabric, helping us to secure more of our customers' assets. And we've been making real gains here with transfers in up over 100% year-on-year. By leveraging artificial intelligence, we have reduced time spent on pension tracing by 87%, on letters of response by more than 75%, and we have fully automated the letter of authority process. And last month, we launched our pension dashboard to existing customers, well ahead of the government 2025 deadline. Finally, we're developing an enhanced non-advised retirement solution with guided pathways that will help our customers better balance the flexibility that they want with the security they need in retirement, all underpinned by structured investment solutions from Aviva Investors. This will allow us to retain our customer assets for longer. Finally, on to customer experience. To see how it's all coming together for our customers, we have a short video to play for you. Take a look at this. [Presentation]

Great video. Far more exciting than me explaining things. So everything you've just seen now, we're already doing. And of course, hybrid advice is coming soon. Maya's journey is just one example, of course. Other customers will choose different pathways depending on their circumstances. The beauty of our model is that we can meet those needs however they shift across their lifetime. This could be a game changer for customers, and it will be transformative for us. So hopefully, you now share our enthusiasm for what we can achieve in the space as Aviva. We have the diversity of offerings required to meet the needs of millions of people at different stages of very different lives. There's a lot to take in today, I appreciate that, but let me leave you with a few key takeaways. Wealth is central to Aviva's strategy and one of our biggest growth opportunities in the U.K. We are already a leader by assets and flows with advantaged workplace and adviser platform businesses. We have invested in technology and innovation. And we are investing in advice and direct wealth to build a truly unique connected wealth proposition, a breadth of offering never seen before in the U.K. Our ambition is to grow the business to over GBP 250 billion in assets and at least GBP 280 million in profit within 5 years, and we're confident we will deliver. So thank you for your attention. I hope we have piqued your interest, and hopefully, you'll see why Amanda, Michele, myself and the rest of the team are so excited about the opportunity. And I'm sure there's going to be plenty of questions. So let's move to Q&A.

Okay. Thanks, Doug. Thanks, Michele, well done. [Operator Instructions]

It's William Hawkins from KBW. Thanks for really interesting industrial insights. I'm sorry, can I be an analyst and just ask you about some of the numbers first. The GBP 280 million target, from my point of view, again, you've told us very clearly about the growth of assets under administration, but how do we think about the growth of fees and the change in the cost to income to get there? I'm assuming that most of the upside to earnings you're talking about is coming from leverage in the cost to income, so fees growing in line with funds and costs growing less than that, but I'm wondering how you think about it. And related to the costs, we've had reasonably visible restructuring expenses in the first half of this year. How do they feature over this business plan? And how do they affect the glide path between today and the GBP 280 million?

Yes, I'm happy to take that. So hopefully, you'll see by the presentation, I mean, we have demonstrated, particularly in our workplace and advice business, improving margins. So we're very focused on the expense and the income ratio. And no doubt, there will be fee compression. We've seen that in the market, we've seen that a little bit over the years, and we've factored that into our progression -- into our projections. But all of that is taken in. We also have the added advantage as you move out through the years that you'll get direct wealth and the advice growing, which obviously have a different margin component than what you see in workplace and advice. So we're very confident in the projections that we've shown. We think we've been not overly ambitious in terms of market growth assumptions and other things, so there's even potential to outperform some of that. But obviously, as a wealth business, we're highly conscious that scale is very important, efficiency is very important. That's why we think as Aviva, we'll be able to compete and beat the competition moving forward. We've obviously invested. You all have seen, we invested, and some of that was above and beyond what our normal run rate would be. We talked a little bit about some of those things today. The lead generation capability that we were building, some of the Succession Wealth integration. Some of that investment will continue slightly in the second half of this year, into 2024. And then will level out over the period. But we have factored into our projections that as a wealth business, we continue to have to invest, we continue to have to meet the needs of our customer advisers, and that's factored in. But the important thing is the fundamentals are there. There's no big migrations. It's FNZ technology that we're very pleased with in terms of underpinning, and a lot of the investment is going into the customer experience. And therefore, it's not as heavily invested as you think it might be.

Thanks, Doug. Okay. Next question. Dom?

Dom O'Mahony, BNP Paribas Exane. Thanks for the presentation. It's really interesting to get these insights and to understand your outlook. I wonder if I could ask three questions, if that's okay. So again, just picking up on the operating leverage point, which Michele, you pointed to. Could you just give us maybe a little bit of a flavor of how the cost base works? So is this one of those businesses where actually 90% of the cost is just running the fixed cost and that's what creates the operating leverage versus, say, marketing spend or servicing customers? The second question is just about Aviva -- the conversion through to Aviva Investors. How is that rate of conversion looking across these different segments? Do you have -- this is clearly focused on the wealth bit of the value chain, but clearly, there's value to be gained there as well. So I'm wondering what your thoughts are on the rate of conversion and whether there's upside? And then just a third question on the consolidation of wealth advice, which we can observe, and of course, you're participating in it. Why is that happening? Why is it that -- go back 10 years, you had a plethora of small firms driving advice and now it's becoming more consolidated. And why do you think that's going to continue?

Thanks, Dom. So great questions. Doug will pick up the first one and Michele will pick up 2 and 3. Is that okay?

Yes. I mean, hopefully, you saw in the presentation, if I use adviser platform as an example, and Roger, I think we said we have, what, 75 million transactions and roughly 99% of them are automated. So when you think about leverage and as we continue to add more assets onto the platform, it's marginal. We don't have to add more people, we don't have to add more things, and therefore -- and you'll have seen that over the last few years, as we've been able to get more scale onto the platform, we've been able to bring down that operating ratio. And that applies to the workplace business and so forth. So we're very, very much focused on that. And that's what gives us a lot of confidence right now, because we've invested in the technology, we have the foundations in place. And there's still a few more things that we'd like to do to automate, no doubt. And we're very focused on making sure that we continue to invest to make it easier for advisers. But we're not looking at having to add people and millions of people. It's the technology is there, and therefore, the scale, and that gives us confidence moving forward in terms of the jaws opening up as we add assets and the margins improve.

If I take the third question first. So why are we seeing this consolidation in the wealth market -- wealth advice market? Well, I think there are several reasons that are driving this, actually. The first one is the demographic of advisers in the U.K. and the age of that population with many people having run successful businesses for many years, but now looking to sell those businesses and to retire. So I think there is a kind of desire to do that. I think the high multiples you're then seeing is an attractive reason to drive sales. The businesses themselves over the last 5 years have had increasing regulatory pressure. So actually, the cost of running those businesses efficiently has been challenged. If you look at the levies and fees that they are paying as well as the move towards a vertically integrated model, if you're not in that, it actually becomes quite a challenge to operate. So we do see this as something that is a kind of a continuing trend. However, what I would say, though, is there is still a large part of the market that varies with sort of sub-five person advisers that are still there and wish to participate in this market. And we might see consolidation into company as well as sort of the creation of super firms or vertical integration. So I think that's the dynamic that's driving it. In terms of Aviva Investors, I think -- I'm so glad you asked this question because, of course, what you can see from the presentation I was giving is that actually from a workplace perspective, Aviva Investors is a natural choice in terms of default choice for our workplace members. It offers fantastic price and choice of passive and active investment funds also in terms of the ESG criteria and credentials. So from an Aviva Investors perspective, we would see that they are working with us very closely to develop solutions that the employers and workplace members are looking for. So we see that as something that will continue to grow. And the interesting piece for the workplace market is that you're -- so as an auto module you're enrolled into, you have to opt out. So there is, of course, that piece. But we are seeing success in terms of Succession Wealth. So Aviva Investor Funds now feature clearly into the restricted proposition, but they actually are on competitor platforms as well, as options. And we are seeing an increasing amount of business placed into those funds. We see that as something that we will see increase as we see the industrialization of the customer engagement engine and the lead flow into Succession. So we see that again as a growing part of Aviva Investors opportunity. And of course, there is a revenue opportunity for us in terms of that additional revenue providing those funds that Doug mentioned.

Next question. Abid. And then Larissa, I'll come to you.

Abid Hussain from Panmure Gordon. Two questions. First, on fees. Just wondering how much fee compression have you factored in across the various segments? Any color on that would be helpful, please. And the second question is on advisers. How many net new advisers do you need to reach your targets? And does AI and ChatGPT and large language models feature within that framework?

So Doug, do you want to take the first one, and Michele the second?

I will take all the sexy questions. Yes. So look, we've seen some very marginal fee compression over the last couple of years, and we've factored that into our progression moving forward. No doubt we don't disclose what happens, right, when we get new workplace customers and they tend to be on a different fee structure than the older customers, and -- but as I say, it's marginal. It's factored in. That's also factored in. You can see the profit growth given the scale. We haven't seen a reduction in revenue as a result of that fee reduction because assets are increasing. That gives us the confidence moving forward. But that has been built into the projections.

In terms of -- it sounds incredibly exciting, doesn't it, this kind of -- so in terms of the advice side, look, we've said 500 planners, that's our aspiration. The reason for that is that we want to become the natural national choice advice firm Succession Wealth in there. So that serving this increasing advice need that people have. We believe that, that will facilitate customers that need advice from the Aviva side, customers in the growing market itself and external. So that's kind of what we're looking at in terms of aiming for. In terms of technology, I talked about artificial intelligence being in the customer engagement engine. I mean, that's really, really exciting for us, because what we're doing is not a blunt instrument. We're literally monitoring a series of data points or landing pages of customer behavior, and we are actually then able to go back with very timely, same day often, interactions to try and understand more about what the customer might want. So when we're seeing customer engagement from our customer engagement engine, it's actually much higher in terms of engagement, response from the customer than we're seeing through traditional sources. So we absolutely believe that artificial intelligence serving customers in the right way can be used both in terms of a positive for generating leads, but also looking at vulnerable customers or looking at kind of foreseeable harm from a Consumer Duty perspective. So we would be looking at using that type of technology across the book. Equally, from a Succession Wealth perspective, clearly, technology is something Aviva can bring something in terms of technology expertise and investment. And we'll be looking for becoming as efficient as we can be. James and the team are already looking at that to help power planners and support the advisers. So yes, absolutely part of the plan moving forward.

Thanks, Michele. Larissa. And then I'll come to you Andrew.

On the target for net flows, what is the critical component that needs to change to meet that target? Is this mainly workplace driven? Or what is the critical aspect. Related to that, would you acquire more in addition to Succession Wealth and the other two acquisitions you've made in the last year? And then on the fee compression, can you give a little bit more granularity on how much or what you think would drive that? Being an analyst and wanting to put a number into our model?

Could you just repeat the last part of the question, sorry?

On the fee compression, can you add granularity to how much or what the big drivers are, so we can get a sense of how far this could go?

Okay. So Doug, would you like to pick up 1 and 3? And Michele, can you pick up the question around acquire more -- actually, should we start there and then go after that to...

Yes.

So our plan as we have shared is built upon organic growth. So it's not underpinned by an assumption that we're going to do this inorganically. However, with Succession Wealth, we have an ambition that we would continue to grow inorganically and organically. So we have an expectation in the next couple of years that we would see that inorganic growth where the right opportunities exist that meet our risk and opportunity perspective of increasing flows by GBP 1 billion. That's what we're looking at. But aside from that, we would always, of course, look, but there's no organic growth -- inorganic growth built into the rest of the plans.

Which is good news, right? Doug?

Yes. I think your first question was on the ambition we set for -- is it the 10% CAGR over the period? Yes, net flows. So obviously, when we said that, it was a much, much different period than where we are today with the cost of living crisis with the Ukraine war and so forth. So we will likely fall short of that. But having said that, we're still growing quite comfortably. And as you can see, I always say you can only control what you can control. And when we look at where we are in relation to our competitors, we're holding up very well. So obviously, we need confidence to return. We're seeing a bit of green shoots in the retail sector. But of course, things have changed in the last week or so, just what's happening globally. But having said that, we're still having some really good growth in the business. And then on the fee compression, I mean, we are seeing very, very low, 1 basis point, if that, per year fee compression. And we do think there's a point where that ends, and we've sort of factored that into our projections. And it's not always 1 basis point a year. It depends on the mix of business that we're doing, depends on renewals and depends on other things. So some years we've seen it stable, some years we've seen -- but it's around that. But you can also see on the expense side that we've been able to outperform that fee progression -- compression. So that gives us confidence in the operating leverage that we have. And that's one of the reasons why you can see our operating profit growing in a greater basis than the assets under management over the 10-year period.

And don't forget, on workplace, the growth on workplace is incredibly resilient. As Michele said, you're seeing salary increases. I think you saw the numbers this morning. So 7% I think it was, the numbers that came out on salary growth, as well as high employment rates. So that is with high retention rates on the workplace theme. So a combination of all of that means that the flows are really holding up. So I think the team has done a great job there. Andrew?

It's Andrew Crean from Autonomous. Three questions, if I can. What is your planned D2C charging structure for your platform? And how will that sit relative to peers? Secondly, on your workplace business, when people reach the age of 65, what is your retention rate on that business in terms of keeping the money? And then thirdly, I just wanted to come back on a couple of numbers you've put out. I mean, the cost-to-income ratio in the workplace business has stayed flat at 71% for the last 2 years. And it has stayed flat in the adviser platform at 84%. So I can't see where the improved cost-to-income ratios are? And secondly, when you talked about 1 basis point movement in the fee margin. In the workplace business, it's gone from 40 to 33 basis points over 2 years. That looks like quite substantial fee compression. I suppose what people are trying to get to is where is that bottom line?

Yes. So I'll take 1 and 3, and you can take 2. I mean, we're not going to disclose today what our D2C charging structures were. I'm doing quite a bit of consumer research and testing on different elements of it. But as you can see, in both our workplace and our adviser, we will be competitive, and the value that we offer and the proposition that we bring, and we think with the scale that we have, there's reasons that we can be very competitive in that pricing, but that will come out next year. On your third question, I mean, obviously, as you can see, I think we've done quite well from a cost-to-income ratio given the assets under management have actually reduced given the market volatility. So we actually have seen efficiencies being driven. But obviously, the assets haven't grown. As we projected, they've come down. And that's having an impact on why those ratios aren't changing. That will also, depending on the mix of business and what funds each workplace client has invested in, the default fund, some choose different default funds, some choose different options. Each of those funds will have a different variance in terms of the market impact. And therefore, it's very difficult to sort of draw that back, but we know, from looking at our book, that the fee compression is 1% or if not, less than that per year.

Okay. Thanks. Michele?