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Report sets out views on current UK wealth management market, including trends, investors’ motivation, valuation levels and considerations for sellers

Hines Associates is a corporate finance advisor focused on financial services.  Since our first completed transaction in the wealth management sector in 2005, we have advised on both sell-side and buy-side transactions.

With so much recent activity in the sector, the increasing interest of North American investors and a number of larger transactions set to come to market in 2021 and 2022, we decided to set out our views on the current UK wealth market.  We have shared our thoughts with clients and other market insiders and reflected their feedback in the report.

A key driver of consolidation is the volume of investment which has been targeted at the wealth sector, particularly from private equity.  In this we see parallels with the general insurance broker market.  This is not a surprise as both sectors share characteristics that are attractive to financial investors.

The report also sees a strong case for integrated business models.  Companies that offer a combination of advisory, platform and investment services are better placed to benefit from economies of scale and are better protected from increasing margin pressures.  Views differ on whether robo advice is the answer for serving the mass market.  At a minimum, however, such innovations will set a transparent benchmark for the cost of advice.  As a consequence, the premium for face-to-face advice will be vulnerable to pressure.

We also highlight opportunities in the sector, in particular from the application of growth strategies that have been successfully developed in other industries, such as branding and a variety of lead generation activities.  Our expectation is for more experimentation and innovation in this area, given the challenge to grow organically in wealth management.

Smaller firms need to specialise to compete successfully.  They will also need to use technology to optimise workflows, and gain access to products and solutions that are relevant to their customers.  It should come as no surprise that this will also make them the most attractive acquisition targets for the consolidators.

Recent marquee transactions have been agreed at record prices, when expressed as multiples of profits, revenues, and assets under management/ advice.  Our analysis indicates that the market values businesses on a “see-through” basis including a share of synergies, but then adjusts for the size of the target, the effort required in realising any synergies, and regulatory risks.  Pension transfer business in particular is highly topical and seems to divide the industry.

We hope that this report is of interest.  You can download the report by clicking below.