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AIMprospector

Will annuity changes bring soaring sales to European Wealth Group? European Wealth Group is a wealth management provider. Documents accompanying its May IPO revealed that the company is looking to capitalise on changes to the fund management industry and pension rules. The UK has a longstanding and diverse wealth management industry. It essentially serves people with so much money that they need a high degree of professional advice to properly manage it. A typical customer of a wealth manager might a be retiree who wants to ensure that they pass on as much as possible but does not have the financial nous to self-direct their investments. Yet, just as providers are diverse, so is the customer base. Wealth managers might be acting for schools, charities or other institutions.

UK has a longstanding and diverse wealth management industry This exposes European Wealth Group to the classic investment manager’s double-whammy. If investment returns are good, the fees being earned rise and new business can be won more easily. However, if returns falter, fees fall and customers can depart. For a large fund manager like Schroders or Aberdeen, it is often wise to first take a view on likely future market returns before trading the shares. Obviously, in rising markets, 8

push more customers European Wealth Group’s way. The RDR made fund manager and platform charging structures more visible to clients. The wealth management industry hopes that this new visibility will make its more personal, bespoke offering appear comparatively better value.

timed its move to AIM perfectly

shares in fund managers perform well. I expect this effect would be less marked with a wealth manager like European Wealth Group. Its customer base will be savvy enough to realise that in the short term, investment returns can disappoint. Wealth management clients are also more expensive to market to, making them more difficult for rivals to poach than, say, an ISA investor would be. As the regulatory burden (particularly anti-money laundering requirements) has become increasingly burdensome, smaller players are finding it tougher to remain operational. European Wealth Group expects that its stock-market listing will help it to play a role as an industry consolidator. This could be achieved by issuing shares to make acquisitions.

personal, bespoke offering

In the last budget, the Chancellor announced that the government would be dropping the requirement for all pension savings to be converted into an annuity. Before retirees can spend the money on something else, they will be made to secure financial advice. This will present a firm like European Wealth Group with two opportunities. The first, to sell wealth management services for a customer’s pension pot and also an offering to manage any non-pension assets. European Wealth appears to have timed its move to AIM perfectly. European Wealth Group (LON:EWG) FOR Industry turmoil brings opportunities Growing top tier of UK wealthy AGAINST Pipeline of expensive regulation Brand currently sub-scale Market cap Bid:offer P/E (forecast)

The regulator’s Retail Distribution Review (RDR) is also expected to

Yield (forecast) 52week low:high

£13m 95p:105p n/a 0 63p:180p

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July 2014 AIM Prospector  
July 2014 AIM Prospector  

Featuring five AIM-quoted companies: European Wealth Group, LiDCO, Tasty , Tricorn and Wynnstay Group.