Private equity firm Permira bought private client investment group Bestinvest at the end of last year and, subject to the legal processes, from Q2 this year it will also own regionally-focussed Tilney Investment Management, Deutsche Asset & Wealth Management’s (DeAWM) UK wealth management business.
Regional bias
DeAWM bought Tilney for £300m seven years ago and, while the fee for the sales to Permira is yet to be disclosed, experts are suggesting it will not recoup the full buy price. Its main benefit will be to offload a loss-making, regional business allowing it to focus, according to Tom Slocock, head of wealth management in the UK for DeAWM, on providing wealth management services from its London office.
While it is not the be-all-and-end-all for the deal, it will bring to market some answers to some very tricky industry problems:
- There is a mythical cut-off figure of around £50,000 as potential clients with less than this to invest are not seen as financially viable for the larger discretionary service providers;
- Overall the number of advisers in the UK is falling and it is the regions that are suffering more than most;
- If there are less advisers dealing with a lower volume of clients then they will need less investment partners to deal with.
The Tilney/Bestinvest relationship shows how all the best bits of these trends can be kept and the negatives worked around:
- Bestinvest has around 200 staff, the majority of who are in London. Even though it acquired Haines Watts just over four years ago giving it a national network of advisers it still has a limited regional investment management presence, with none at all in the regions that Tilney is well represented – Birmingham, Edinburgh, Glasgow and Liverpool;
- Around 40% of Bestinvest’s investment business is execution only, which is 40% more than Tilney has so together they can immediately offer clients a far broader proposition;
- Bestinvest’s portfolios are made up of collectives, including open-ended funds, investment trusts and ETFs; around 250 IFAs use Tilney which was borne out of a traditional private client stockbroking business and still retains an emphasis on equity research. Tilney has a very strong direct UK equity and fixed income research and investment capability and, according to Jason Hollands, Bestinvest’s managing director, business development and communications, they will continue to receive Deutsche Bank’s equity research;
- Bestinvest offers an investment solution whether a client has £1,000 or £1m to invest; Tilney’s typical client in its managed portfolio service will have around £100,000 to invest with £1m being a typical amount for its discretionary proposition. Combined, they can offer a broader proposition to more individuals.
Philip Muelder, the partner in Permira’s financial services team who worked on the firm’s deal with both Bestinvest and Tilney, said: “This is a very fragmented market and regulation is changing who is participating. We now have a product offering that spans the entire market and can look at smaller clients than we could previously.”
He added that what he is now able to offer is, among other things, a home to orphan clients from retail banks who don’t want to deal with, for want of a better word, low-end business.
A proper all-service offering
The new entity business will have national coverage; offer execution only through to bespoke discretionary management portfolios; will be available to investors no matter how low the amount they have to invest; will have expertise in collectives and direct UK equity and fixed income security investing.
All of this will come from a single investment proposition under Bestinvest CIO Gareth Lewis, building on the £9bn of assets under management the combined businesses will run while maintaining their current, separate brands.
Cruise ships take an age to turn but at least they our industry has started to turn and – while there is bound to be the odd Costa Concordia – along the way, the Bestinvest/Tilney relationship is great template.
