WHAT CONSULTANTS SAY: A Look Back At M&A In Wealth Management

Fred Hansson, IMAS, Partner, 12 March 2014


This article is by Fred Hansson, a partner at IMAS. He examines the latest developments in mergers and acquisitions in wealth management, and the lessons to be drawn from them.

This publication has approached a range of highly respected consultants operating in the wealth management sector to give their views about a range of challenges and opportunities for the industry in different parts of the world. A number of articles will be released in these pages in the coming weeks and we hope readers find them stimulating. The articles have been sought by this publication and also by Bruce Weatherill, of Weatherill Consulting, and also chairman of ClearView Financial Media, publisher of this news service. This article is by Fred Hansson, a partner at IMAS. Fred has some 20 years’ experience of corporate finance having specialised in European Mergers & Acquisitions and Equity Capital Markets throughout his career. Prior to joining IMAS, Fred worked for JP Morgan Cazenove, Handelsbanken Investment Banking and Kaupthing Singer & Friedlander. To view the item by Aite Group, click here.

2013 saw an increase in M&A activity across the financial services sector in the UK and the wealth management industry (including investment managers and financial advisers) had its fair share of it. The number of announced M&A transactions with a value in excess of £5 million rose by 54 per cent and we estimate that the aggregate value of the deals grew to £4.9 billion, almost double the amount of last year.

The increased deal activity was partly driven by the divestments from banking groups which are reviewing their strategies in retail investment advisory and asset management in pursuit of more focused business models. Examples include Lloyds Banking Group’s gradual reduction of their 52 per cent stake in St James’s Place and The Co-operative Banking Group’s sale of its life insurance and asset management businesses to Royal London.

However, while larger diversified financial institutions are streamlining their operations, some investment managers are contemplating adding advisory services to build more vertically integrated models as a means to grow their AuM and create stronger bonds with their clients.

Having your own financial planning capability also has the advantage of reducing client attrition risk for investment managers, who rely largely on IFAs for their distribution. In the name of RDR, they could easily become victims of financial advisors’ objective selection processes if being primarily based on investment performance metrics.

Many IFAs welcome this development. They may have found it increasingly difficult to charge their clients enough to cover their rising costs of providing financial advice and prefer building recurring income streams together with an investment manager to create stability of earnings and capital value. In addition, synergies are often achievable in the investment suitability assessments and client relationship management between the investment managers and IFAs.

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