Is your firm the next in line

Just as football fans love a last-minute transfer deadline-day deal, so financials analysts drool over potential wealth manager mega-mergers.

Is your firm the next in line


And so yesterday, we had pen to paper confirmation of private equity-backed Towry’s £97m acquisition of rival Ashcourt Rowan. Having already bought out Baker Tilly’s private client business last year, is this the final ingredient for a winning team? And where will the combined business sit in the league table of wealth manager AUM?

“The offer for Ashcourt Rowan represents the continuing aspirations of the Towry team to build scale and capability,” says Andrew Watson, research analyst at N+1 Singer.

“On completion, this will deliver a near doubling of Towry’s assets to c£11bn, generating additional returns, and also adding a bespoke discretionary management capability to Towry’s offering.”

Top of the league

The business will still sit someway behind the likes of Rathbones (£26bn), Brewin Dolphin (£24bn) and Investec Wealth & Investment (£24bn) in terms of AUM.

Brewins has its own equity analysts of course, and for its financial services expert Ruairidh Finlayson, more consolidation is likely in the sector, particularly given the regulatory burden on smaller firms. He points to a big shift from defined benefit to defined contribution pensions, with accumulated wealth either going to direct-to-customer platforms, or to wealth managers.

“The chances are they will both benefit from the rise of people dealing with their own wealth, rather than it all going into a company pension fund,” he says.

“The amount of consolidation in this sector over the past few years has been quite impressive and yet there is still a lot of probably sub-sized wealth managers in the UK that are likely to be ‘hoovered’ up, both private and publically listed,” he says.

Fewer bigger players

“The chances are that will continue because the drivers are only really going one way. In five to ten years there will be a lot more consolidation with fewer bigger players. There are probably too many at the moment fighting over essentially the same pot of money.”

Of course, they will not have it all their own way, particularly as some firms once known solely as life insurers, such as Standard Life and Old Mutual, have been making huge inroads in building up their wealth management capabilities, and this will only continue.  

Still with their client base seemingly on the rise, and an ageing population creating greater need for their services, there is plenty of scope left for wealth managers to take their piece of the pie. The bigger the better? 

Gervais Williams, managing director at Miton, has been a holder of Ashcourt Rowan in his small-cap funds. His expectations were that it was more likely to acquire than be acquired, 

"There are advantages in being a firm with the flexibility still to run around and flex with the industry and market changes, which are rapid at present," he says.

"Just being the very biggest doesn't necassarily mean you have the advantage. Still, being big means the cost of regulation and other things can be spread more widely."