The bank set out its views on a cluster of UK-based wealth management houses, arguing that they benefit from a variety of forces, notwithstanding the current volatile macroeconomic environment.

Investec Bank in the UK has set out a range of buy recommendations on a suite of wealth management houses, smiling on AJ Bell, IntegraFin Holdings, Quilter and Rathbone Brothers, while preferring to hold Brewin Dolphin and Hargreaves Lansdown.

The bank brought out a research note on its view of the sector, arguing that background conditions for such wealth managers remain broadly positive despite current worries about supply chain disruptions and the impact of Russia’s military actions against Ukraine.

“These market dynamics should support attractive levels of long-term growth, growing cash returns and a further strengthening of balance sheets. Although we see good value across the sector, our preferred names are those with the largest gearing to likely widening of the advice gap and the rise of the mass affluent,” the firm said in the note, issued late last week.

“In our view, one of the key attractions of the subsector is their exposure and gearing to strong underlying structural growth drivers. Our own analysis is consistent with that of industry commentators who forecast assets under administration in the UK wealth management industry increasing 7 per cent compound annual growth rate out to 2024, with potential for this to be sustained into the long-term, we believe,” it continued.

Investec said its “top pick” is Quilter, reflecting the “integrated nature of its model” and its ability to plug into market-driving themes; it also sees “strong structural support” in AJ Bell’s business model. 

Specifically on Quilter, Investec said: “The integrated nature of Quilter’s model not only makes it unique in the market, but also positions it to take advantage of a number of trends we expect to play out. The scale of its financial planning footprint should ensure it is well placed to benefit from the increasing demand for advice, and the quality of its investment solutions should also see it capture a greater proportion of the available fee pool. Beyond this, we see the group’s evolving hybrid model alongside its diverse sources of client origination as perfectly positioning the group to capitalise on the continued growth amongst the mass affluent.”

Elsewhere, the bank said the quality of IntegraFin’s offering does “not appear to be fully discounted in the share price,” it also thinks the share price discount on Rathbones “feels overdone.” (IntegraFin is the holding company of Transact, the UK investment platform.)

“We rate Brewins and Hargreaves at HOLD given risks around the deployment of new technology and the relative profile of earnings,” Investec said.