The pair said they want the financial planning firm to be among the top three biggest in the UK within five years.
This new financial planning venture for affluent customers will be shared through Lloyds which will own 50.1% of and Schroders 49.9%.
Lloyds will transfer £13 billion of assets from its wealth management arm to this joint venture (JV) and Lloyds customers will also be referred to it.
The JV will be led by Schroders' co-head of UK intermediary James Rainbow, as its chief executive, and Scottish Widows’ chief executive Antonio Lorenzo will be its chairman.
As part of the new creation of the JV, Lloyds is taking a 19.9% stake in Schroders' UK wealth management business which will provide ‘Lloyds' high net worth customers with access to Cazenove Capital's leading wealth management propositions’.
The pair said the union will also use the Schroders-owned investment platform Benchmark Capital.
In their market announcement the companies said the JV 'will address the growing gap in the advice market' using an 'advice-led' proposition 'backed by world-class investment expertise'.
Lloyds has previously stated it is targeting 1 million new pensions customers by 2020.
The new partnership between Schroders and Lloyds will also see Schroders awarded an £80 billion mandate for the Scottish Widows Investment Partnership (Swip) money which is being moved away from Standard Life Aberdeen.
‘The management of £67 billion of Scottish Widows insurance related assets will commence following conclusion of the current arbitration process with Standard Life Aberdeen or by no later than when the existing contract ends in March 2022,’ the pair said in a market statement.
Meanwhile £13 billion of wealth money and £400 million of private client money will transfer to Schroders as part of the arrangement. Earlier this month the rest of the Swip mandate was awarded to BlackRock.
The pair also said they would be considering other opportunities to work together, including advice and investment propositions for Lloyds’ retail clients.
Peter Harrison, Schroders chief executive, said: ‘Wealth management is a strategic priority for Schroders. In combining our award-winning technology and world-class investment expertise with Lloyds' significant client base and digital capabilities, we are creating a strategic partnership which is exclusively focused on the evolving needs of UK savers and investors. I am also delighted that we have been entrusted to manage £80 billion of assets for Lloyds' and Scottish Widows' clients.’