As Table 1 shows, Brewin Dolphin, Rathbones and Investec Wealth each has well in excess of £30bn in assets. The latter also boasts the largest number of clients among participants, amounting to 122,000.
Despite the apparent slowdown in industry growth, some of the bigger names have continued to record substantial asset growth. Brewin Dolphin’s latest disclosed level of assets, £39.5bn, represents a substantial increase from the £30.7bn recorded in Money Management’s December 2015 survey of the sector.
Organic growth is not the only factor behind asset gathering, given that a period of prolific merger and acquisition activity among wealth firms has allowed others to capture a significant client base. Tilney, which has made a series of acquisitions that culminated in a deal for rival Towry last year, has a book of nearly 115,000 clients, though it still trails the biggest firms in terms of overall assets.
In contrast, a number of respondents have well under £1bn in assets. For clients, these differences could prove important if reflected in the approach taken within portfolios: those running smaller pots of money can theoretically take a more nimble and effective approach by, for example, investing in smaller funds. A counterargument is that those handling bigger sums of money can generate economies of scale, which can be passed to investors in the form of reduced fees, while commanding greater resources.
DFMs have recognised that the ongoing consolidation of assets among a select few creates some problems, but also brings opportunities for smaller names.
Ben Willis, head of research at Whitechurch Securities, which has just £400m in assets, says: “The DFM market has become saturated and there has been plenty of consolidation along the way, creating several DFM behemoths. For a boutique such as us, this has provided both benefits and disadvantages in winning new business.”
In larger firms’ favour is their distribution reach and pricing power. But smaller companies can often offer a more personal service and use more idiosyncratic fund buy lists.
At the largest firms, hundreds of staff are responsible for running client portfolios, with a substantial 427 carrying out this function at Brewin Dolphin. For some smaller names, the number of portfolio employees is in single figures.
Across the board those teams dedicated to investment research are much smaller. Cazenove is the largest, with 100 staff members focused on this part of the business, but this may be due to the firm’s heritage as a stockbroker.
Some advisers already see research and its use as one way to differentiate between investment propositions. This is not always simply a case of which DFM does the most research itself: often, it is about the information they garner from providers.
