The battle for control of high net worth assets continues and discretionary fund management companies continue to look to M&A to consolidate the industry and increase their funds under management. The greater control they have over those assets, the higher fees they can charge and vertically integrating continues to be an attractive model.
It is still easier to grow wealth managers through acquiring portfolios of assets, however the trend is now to acquire larger businesses with good quality assets that are well managed rather than small managers that lack the systems and controls to keep on top of compliance.
Small acquisitions are rarely integrated well without losing large swathes of clients and getting certainty that you are not acquiring some legacy regulatory issues is tough. Expect to see more consolidation in the middle to large players.
The wealth manager has spent the past three years transforming itself from an old-fashioned stockbroking group into a more modern wealth manager, increasing its focus on discretionary fund management. David Nicol, chief executive, said the numbers reflected the recent “strategic transition” of the company. Peter Lenardos, analyst at RBC Capital, said the wealth manager had “takeover potential”. “Following recent sector consolidation, we believe that excess capital, a weak sterling, ultra-low interest rates, and an uncertain outlook could drive further M&A across the sector,” he said, adding that Brewin’s “attractive valuation” and strong balance sheet could make it a “tempting target”. Mergers and acquisitions swept across the £1.8tn sector this year, with a focus on midsized wealth managers that had between £5bn and £10bn of assets under management.