There will be an increasing trend of mergers and acquisitions in the IFA and wealth management sector over the next 5 years, as smaller companies find it harder to compete and costs increase, according to new research from wealth manager Investec Wealth & Investment (UK) with financial advisers and financial planners across the UK.
There has already been a high level of consolidation within the IFA and wealth management sector, but the study among 100 IFAs and financial planners across the UK, found nine in 10 (90%) of IFAs and financial planners predict this trend will increase in the next five years. Of these, around one a third (32%) predict a dramatic increase. Only one in 10 (10%) expect the sector to stay the same as it is today.
Around three quarters (76%) of those surveyed believe further consolidation will be driven by smaller IFA firms and wealth managers not being able to evolve as they need to meet the changing needs of clients. Other reasons cited include smaller companies finding it increasingly harder to compete combined with the increasing cost of running a business (52%) and the growing importance of a firm’s own brand and being part of a bigger organisation (47%).
However, the research by Investec Wealth & Investment (UK), which provides products and services to help advisers build a competitive advantage and protect and grow their clients’ wealth, also reveals 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 helping to reduce their running costs.
The research suggests that on average, the minimum value of investible assets required by clients before IFAs will work with them is £177,250. This has come down from £209,250 which was the average minimum value required by IFAs five years ago.
Investec Wealth & Investment head of strategic partnerships, Simon Taylor, 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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By GlobalData“More positively, technology is also enabling firms of all sizes to take on more clients with lower average values of investible assets. 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.”
