Battling for survival
Bellpenny has made 26 acquisitions in three years, while Towry recently saw its assets under management surpass £11bn with the purchase of Ashcourt Rowan.
Matt Phillips, TMI’s managing director, believes that with firms executing expansions of this scale, on top of smaller but numerous other buy-outs, it is possible that smaller IFAs will be squeezed out of the wealth management landscape as the larger firms exercise their financial and reputational muscle.
“It’s a little way off, but I can see it happening,” said Phillips. “Apart from a handful of big firms, it is still very much a cottage industry made up of four or five-man bands dotted around the country.
“A lot of the smaller companies have lifestyle businesses that do the right thing for their clients – at the end of the day wealth management is a personal business, and you have to earn the clients’ trust. But I see it becoming harder for these smaller IFAs over the next five years or so.”
Rothburn feels that the UK wealth pool has hit a high-water mark, sparking a wave of industry change and subsequently exacerbating the battle for survival.
“UK wealth has peaked,” he said. “It may not mean that overall money in the industry will decrease, but there could be a shifting of the sands and consolidation of the number of the players. With the amount of regulatory pressure and rising expectations and standards they cannot all survive, we will see some falling by the wayside.”
All may not be lost for the smaller firms, however, Hawskmoor CEO John Crowley says that it is quality of service that sets the smaller firms apart from their larger, national counterparts.
“Private client investment management is better achieved through very service-focused small to medium-sized firms, as opposed to large companies where everything is more processed and centralized,” he expanded.
“Clients want to put trust in their managers and feel that they are not just a number receiving a homogenised service, which is increasingly the case with larger firms. With smaller businesses there is the ability to maintain quality service while finding opportunities for good performance.”
So it seems beyond doubt that having negotiated and cleared the regulatory minefield, wealth managers are turning their focus back to growing their profits in the post-RDR environment, posing the new conundrum of not just who, but where, the victors will emerge.
However, while the industry watches to see if the UK wealth pool will continue to fill or be slowly drained, it is apparent that whether firms sink or swim will depend not only on the size of their financial armbands but also their form and who is on their team.
