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UK wealth management firms are facing the challenge of achieving growth in a static market An examination of the regulatory and market pressures combining to stymie organic growth of industry players, and what companies are doing to meet growth expectations. The same challenge is also faced by small to medium lenders.


Regulatory Pressures ◆ Pension reforms now in force since 2015 give the public more control over their own pension pots ◆ New regulations that require wealth managers to be more transparent about what they are charging for their services. ◆ GDPR


Five Market Trends Together these market forces & trends are upheaving the legacy wealth management industry 1. Technology & AI 2. Innovative thinking 3. More differentiation 4. Demand for better customer experience 5. Cybersecurity & privacy


1. Technology & AI

{ Wealth managers harnessing technology and AI will leap ahead as they secure efficiencies and gain insights from big data


2. Innovation

{ Coupling technological advances with innovative thinking is necessary to satisfy customers who want changes to tired services and dull offerings.


3. Differentiation

{ New and differentiated products, more attuned to customers, are needed. Product advances will stem from customer analysis on a micro level


4. Demand for better customer experience

{ Customers expect a higher level of service across all areas of their life, and wealth management firms on the whole fail to deliver a quality, personalised experience.


5. Cybersecurity & Privacy

{ Wealth managers are sitting on a swathe of very personal and sensitive information that needs to be securely locked down, protected and revealed on demand to the subject.


Effects on Wealth Managers of regulations ◆


rise in demand for financial advice high fees are putting a lot of potential investors off wealth managers are increasingly reliant on referrals from financial advisors for new business

of market forces ◆

competition has increased faster than the rise in demand for financial advice traditional firms are struggling with technology and innovation necessary to meet customer demand

How to grow?

{ 1. Horizontal Integration – buying competitors 2. Vertical Integration – buying referring adviser businesses


1. Horizontal integration Case example: Rathbone Brothers Plc With 15 offices in the UK and Jersey, Rathbones is one of the largest wealth and investment managers in the country Management and investor target: Growth rate 5% per annum, with ÂŁ40 bn under management by year-end. Problem: Despite intensive marketing efforts, Rathbones was failing to attract new customers Alternative course: Buy in customers through competitor purchase Solution: Acquisition of Spears & Jeffrey, a long-established investment manager Result: Immediate influx of new customers. Clients of the combined enterprise will benefit from a larger range of services. 11

2. Vertical integration Case example: Brewin Dolphin Management and investor target: Achieve a 10-15% increase in NP in the current year Problem: In the increasingly competitive market profits were slipping and shareholders were pressuring for action

Alternative course: Purchase an integrate a profitable financial adviser business Solution: 2017 purchase of Duncan Lawrie Asset Management for GBP28m Result: Achieved 15% growth in profitability to ÂŁ70m. Encouraged by this to make further financial adviser acquisitions including Dundee-based Clark Thomson in May 2018.


Challenges of small to medium lenders in the UK ◆

Removal of cheap funding from Bank of England

Economic uncertainty and slowdown

Increased competition


Small to medium lenders What are the effects of these challenges? ◆ Reduction of margins ◆ Wave of consolidation ◆ Faster flow of M&A over the next two years


Case example Clydesdale & Yorkshire Bank Problem: CYBG has been struggling to increase market share in a tough climate, further restricted by its regional focus. Alternative course: purchase a small, nationwide lender for immediate increase in market share Solution: Make an offer for Virgin Money (accepted in June 2018). Benefit from immediate branding value and a nationwide customer base. Virgin is able to reduce its low balance card offerings, which it had received warnings about by the Bank of England. Combined group will have more products available to service customers. . 15

The UK’s leading source of mid-market acquisition information. For over 20 years the UK's leading independent business for sale & distressed business listing service. You can contact the author Chris St Cartmail at Visit us at Call us on +44 208 875 0200

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