Clients’ need for advice does not ebb and flow with the news cycle – pensions, tax wrappers and, for some, intergenerational planning and, increasingly, cross-border considerations require ongoing long-term support.
That all makes wealth managers and IFAs resilient, while their recurring revenues and good cashflow visibility makes them well-suited to capital-intensive investment. There is also ample room for growth, with under a tenth of adults in the UK accessing financial advice. For mid-sized firms, scale, technology and focus can boost growth – and carefully executed M&A can accelerate this and improve client outcomes.
Growing demand is driven by two factors:
* Demographics: Ageing populations and the transfer of wealth between generations are expanding and shifting affluence in both advanced and faster-growing economies. New investors are entering advice for the first time, while established families often need a higher level of support as portfolios become more complex and international.
* Expectations: clients increasingly want a broader relationship that goes beyond investment selection to include financial planning, reporting, governance and, for some, philanthropy.
Supply, meanwhile, is fragmented. Established firms are launching new services and digital channels, while specialist boutiques are emerging to cover niches from entrepreneurs’ wealth to cross-border tax. The variation in providers and their experience means service levels and technology vary widely.
Combining high-quality advisers into a well-run firm can offer benefits of scale without eroding the proposition, including a broader product offering and often improved client experience. Additionally, legacy systems can be modernised, which should bring about efficiencies and even enhanced data. While the upfront investment can be significant, better data and workflow tend to strengthen compliance, reduce errors and improve adviser productivity.
How to scale well
M&A should be executed alongside other growth levers rather than as a standalone strategy. Additional value acceleration strategies that can drive growth for wealth managers include digital & data (modernising core platforms, unifying data and automation) and – crucially – talent (retaining advisers).
Pursuing these growth levers during M&A can help to minimise ‘value leakage’ during integration. Equally important is mitigating risks, so standardising processes and installing supervisory controls to ensure robust governance is vital.
“For mid-sized firms, scale, technology and focus can boost growth – and carefully executed M&A can accelerate this and improve client outcomes.
In a business as personal as wealth management and financial advice, retaining the connections is paramount to protecting and growing revenues – and maintaining culture.”
Creating a standalone M&A and/or change professional or team can make a meaningful difference by ensuring diligence, planning, post-close delivery and governance are ‘owned’, while local leaders can focus on maintaining and nurturing client relationships.
Talent is key. In a business as personal as wealth management and financial advice, retaining the connections is paramount to protecting and growing revenues – and maintaining culture. Earn-outs and equity participation in enlarged businesses can help keep people in-house – even as the house is expanding.
As with most businesses, data is hugely important. Growth brings more information – but making it valuable requires making it usable. This makes state-of-the-art technology key. Fine-tuning it to form a single source of truth for each business can improve records and enable timely, proactive engagement for both up-selling and cross-selling within a larger group.
The value in consolidation has been illustrated in the past. UK wealth platform Succession, for example, pursued an ambitious acquisition programme over several years, completing around 60 deals. Assets under advice rose from roughly £1.7bn to £9.5bn when Inflexion sold it to FTSE 100 buyer Aviva. Key to Succession’s success was a clear integration playbook, consistent planning, technology modernisation and a firm focus on adviser retention.
Keys to success for wealth managers:
* Operating discipline: In a regulatory environment that is not getting any simpler, firms with clean data, standardised processes and well-evidenced advice will scale faster. The FCA has been increasing its scrutiny of wealth managers, including regulation, to boost people’s access to advice and ensure outcomes can be achieved in a way that offers value.
* Thoughtful consolidation: Pace matters – but so does selectivity. The most effective acquirers buy what enhances capability or reach, then integrate carefully.
* Client experience, powered by modern technology: The winners will marry face-to-face advice with digital convenience powered by digital enhancement and AI – secure document exchange, real-time portfolio views and frictionless onboarding.
The consolidation strategy requires capital as well as operational infrastructure, management organisation structure (including an integration team) – and, of course, the right expertise. With more than 5,000 IFA firms operating in the UK, each facing increased regulation, the increase in consolidation is helping the industry to offer a better service, cost and outcome to customers.
For many mid-sized firms, partnering with an experienced financial backer can provide both the funding and support to modernise systems, professionalise the operating model and execute M&A – without disrupting the client experience that made the business attractive in the first place.
Andrea Bertolini is a partner and head of financial services at Inflexion, a leading mid-market private equity firm with more than £14bn under management. It invests in entrepreneurial, high-growth businesses with ambitious management teams, working in partnership with them to accelerate growth. The firm’s approach allows it to back both majority and minority investments.
Case study: Absolute Financial Group
Inflexion has recently supported the launch of Absolute Financial Group with £100m of committed funding. The aim is to build one of the UK’s leading independent financial planning platforms by bringing together high-quality advisory businesses under a unified, well-resourced structure focused on excellent client outcomes.
Absolute Financial Management, a South-East-based firm with around £1.1bn of assets under advice, is the first acquisition and lead brand. The business has completed 13 acquisitions since 2020, developing a track record in the integration and adviser retention that is so critical in a relationship-driven market.
Working with Inflexion and under the guidance of Paul Howarth as chair, the group is developing an M&A pipeline to accelerate growth while standardising systems and processes to maintain service quality at scale.
