Nine out of 10 advisers expect the already high level of sector consolidation through mergers and acquisitions to increase over the next five years.
A survey of 100 IFAs and financial planners carried out by Investec Wealth & Investment UK also found that of this 90%, a third (32%) expect a ‘dramatic increase’.
In terms of the drivers of this trend, the researchers found three in four (76%) advisers and planners believe further consolidation will be driven by smaller IFA firms and wealth managers ‘not being able to evolve’ to meet the changing needs of clients.
Other reasons cited by those surveyed included smaller companies finding it increasingly harder to compete combined with increasing costs (52%) and the growing importance of a firm’s own brand and being part of a bigger organisation (47%).
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On the positive side, the researchers also found that advisers are now increasingly able to take on more clients with lower values of investible assets than they required five years ago because technology is reducing running costs.
The research suggests that on average, the minimum value of investible assets required by clients before IFAs will work with them is now £177,250. This has come down from the £209,250 average minimum five years ago.
The table below provides a full breakdown:
| Value of investible assets | Required five years ago | Required today |
| Less than £10,000 | 0% | 0% |
| Between £10,000 and £50,000 | 5% | 5% |
| Between £50,000 and £100,000 | 36% | 29% |
| Between £100,000 and £250,000 | 29% | 48% |
| Between £250,000 and £500,000 | 24% | 17% |
| Between £500,000 and £750,000 | 5% | 1% |
| Between £750,000 and £1million | 1% | 0% |
Simon Taylor, head of strategic partnerships at Investec Wealth & Investment (UK), said: “The wealth management sector has already undergone rapid change, with high volumes of M&A activity, but this trend only looks set to increase. Smaller adviser firms are finding it increasingly difficult to compete with larger, more well-known brands, and combined with rising business costs it’s likely that many more will consolidate in the coming years.
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“More positively, technology is also enabling firms of all sizes to take on more clients with lower average values of investible assets,” he continued. “Having the right technology, products and services available to IFAs and wealth managers enables them to build stronger client relationships, win new clients and reduce the admin burden currently experienced by so many in the sector.
“Our local business development teams are well connected to the IFA market and can help facilitate introductions for IFAs looking to sell up.”
This article was originally written for our sister publication, PA Adviser
