Speaking to Portfolio Adviser on the announcement, Harwood CEO, Alan Durrant, said the rationale for the deal was to provide more choice to advisers, in a wealth management landscape, where the game has been changed by both RDR and the pensions freedoms.
“When we speak to advisers, while some, because of the way their businesses are structured only want a unitised product, or only a discretionary solution, most want a choice of both,” he said.
Much of this demand stems from the changing IFA landscape brought about by the Retail Distribution Review that has led to a hefty and growing regulatory burden for advisers.
According to Harwood CIO, Richard Philbin, it is likely that an ever increasing number of advisers will hive off the asset management parts of their business or look to use investment solutions as a way of minimising some of that burden.
“We can now offer both parts of that trade, providing managed funds mostly to advisers’ lower net worth clients and a discretionary service to higher net worths.
It is also for this reason that both Wellian investment director, Chris Mayo and Philbin were clear to point out that the processes that have worked thus far will continue.
As Philbin said of the investment process: “It is going to be an evolution rather than a revolution over the next weeks and months. But, what I can say is that the main outcome will be a process that aims to deliver repeatable, reliable solutions for clients.”
Scale
It is, however, the second piece of legislation that provides a more interesting backdrop for where the firm may be headed and, indeed, the sort of line that can be extrapolated to other wealth management firms.
“The market is starting to realise the opportunities provided by the pension freedoms,” Durrant said, “Previously you had a client from around 45 to 65. Now, rather than having to buy an annuity at 65 (and thus effectively being lost to the life companies) we can add another 30 years to that.”
And, importantly Durrant added, that money can be passed on rather than disappearing with the annuity when someone dies. Which means we will begin to see 20, 30 year olds with a much better savings profile.
“I think we are going to see an exponential growth in the potential for saving in the next few years,” he added.
Such an increase in the potential for saving should be welcomed by the wealth management sector. Not only because a lack of sufficient savings is often cited as one of the sector’s biggest concerns, but also because of a number of demographic headwinds: existing clients continue to grow older and the pool of new clients is not being refilled quite as quickly as in the past because many in the upcoming generation either have less money than their forebears or are unwilling/unable to use bank leverage with the same success as their parents during the accumulation phase to grow their respective asset bases.
It is, thus, understandable that Harwood wants to position itself to play across as much of the spectrum as possible. And, it is equally understandable why Durrant believes the firm to be in a growth sector and why further consolidation is likely.
