Mergers and acquisitions  

M&A activity will continue in advice industry

M&A activity will continue in advice industry

The past year will be remembered as a year of heightened corporate activity with both initial public offerings and a very active merger and acquisitions market, according to Tilney Smith & Williamson.

Speaking to FTAdviser, Jason Hollands, managing director at Tilney Smith & Williamson, said: “We expect to see continued M&A in the advice and wealth management sector, carrying on from the trend in 2021.

“This is a sizeable industry, that collectively looks after circa £1.7trn of assets, but it remains highly fragmented with more than 5,000 firms, most of which are small in size. 

“The rising regulatory burden and need to embrace new technology are pressures on the industry that are not going to go away and are driving the need for increased financial and operational scale.”

Hollands said 2021 will be remembered for the increase in activity and M&A market.

“Private equity firms were notably active across multiple sectors, with ample capital to deploy,” he said. “The financial services industry was not immune from this, with a wave of deals throughout the year of various sizes involving both trade buyers and private equity investors."

He said 2022 will see the industry broaden its reach through service innovation from both existing firms and new players. 

“Vast swathes of the UK population who own long-term assets such as workplace pensions and who would benefit from professional support, are currently under-served by the financial advice industry,” he said. 

“This comes down to a combination of lack of awareness, the affordability of advice and, for firms, the cost to serve based on traditional business models. Technology is key to resolving this conundrum, with the ability to deliver advice and guidance more efficiently to a much wider audience.”

Hollands added that he expects to see this problem better addressed through the launch of more affordable, technology-led solutions that combine interaction with qualified people with digital tools. 

“While technology will make it easier for clients to access wealth management services remotely, don’t expect to see a mass retreat of firms from towns and city centre locations around the country. 

“We know that many clients will continue to want to meet face-to-face with their advisers in offices close to where they live and work. Given the ‘Zoom-fatigue’ experienced by many during lockdowns, there will be clients keen to attend physical, live events in convenient locations.”

 

Strong performance

Overall, Hollands said 2021 had been a great year, with the rollout of Covid-19 vaccines acting as an escape route from lockdowns and the economy to reopen. 

“When combined with unprecedented monetary and fiscal stimulus, recovery optimism gave renewed impetus to the equity bull-market which began in the first quarter of 2020,” he said.

“The strong performance of risk assets in 2021 has clearly been positive for established investors, including the clients of financial advisers and wealth managers.

"But it has also drawn in a new generation of typically younger investors who, while stuck at home for prolonged periods of time and with excess cash at their disposal, developed a taste for trading stocks on digital platforms.”