Who are the current game-changing companies in the UK investment scene? Well, there are two firms who must certainly now be considered as leading candidates when it comes to the combination of investment management and financial planning.
Both have made a series of acquisitions over the past 12 months, and the latest are the most significant yet.
Last week we discovered that Tilney Bestinvest is to acquire Towry, while the Standard Life-backed 1825 is to buy Baigrie Davies. Both represent good news for investment advisers and business owners who have at least one eye on an exit strategy.
The Towry deal has gone through for a not-insignificant £600m.
That’s 13 times current private equity owner Palamon Capital’s original investment, though it’s worth emphasising Towry’s own acquisition spree means it has become a much larger business during the past decade.
Clearly, all these companies’ histories diverge significantly – Towry has had a roller coaster couple of decades – but it is the commonalities that may have implications for the market.
First, both Standard and Tilney are setting out to create vertically integrated firms offering financial planning and investment management.
Might these brands become strong enough to rival an SJP or a Hargreaves?One suspects it is Tilney Bestinvest that will move more swiftly to integrate, with 1825 taking a gradualist approach for now as it establishes its place in the market and finesses its strategy.
Tilney and Towry’s focus on integration is further underlined by the suggestion that other future acquisitions will only be regional in scope.
Here, too, we find a parallel with 1825’s own regional strategy.
These twin developments hold out the possibility that smaller investment and advisory firms will find themselves competing regionally with the local arm of a big national or two.
Given the huge and growing demand for advice, this may prove more of a challenge recruitment-wise than a significant rival for clients. But it wouldn’t pay to be complacent.
It will also be interesting to see how, and in what way, these big players embrace automated advice and guidance.
The Bestinvest part of Tilney clearly already understands very well how to attract better-off, self-selecting clients. But the Financial Advice Market Review may eventually make the process a lot easier to introduce the mass market.
We may even see these firms developing brands strong enough to begin to rival, say, a St James’s Place or a Hargreaves Lansdown.
That isn’t going to be bad for investors at all. But is it bad for other investment advisers?
On the one hand, it may enhance the available market. On the other, as the industry changes and vertically integrated restricted firms grow in influence, it won’t hurt to revisit the rationale behind providing a more personal and independent approach with clients.
John Lappin writes on industry issues
