The global financial advisory and wealth management landscape is in an extended state of flux as waves of consolidations transform the market. There is a growing trend of mergers and acquisitions (M&As), with a PWC survey predicting that one in six wealth managers globally will be acquired or exit by 2027, which will only intensify as companies strive to adapt to the evolving economic, regulatory and business backdrop, says Mike Foster, chief commercial officer at Coleman Wealth.
In Europe, France has become a hotspot for smaller deals, with Groupe Premium, Groupe Crystal and Astoria Finance completing five mergers between them, whereas in Asia, 58% of CEOs are now reporting a strong appetite for consolidation, up nearly 50% from last year.
Indeed, an Investec Wealth & Investment survey of UK IFAs and financial planners found that 90 per cent believe that the sector’s high volume of M&As will only continue to increase in the next five years. Tellingly, three quarters believed that further consolidations will result from smaller IFA firms and wealth managers being unable to evolve to meet clients’ changing needs. Half of respondents also cited the difficulty of managing the rising costs of running a business.
Similarly, in the Middle East, over half of CEOs anticipate that regulatory developments will further fuel M&A activity. This does not just help small firms seeking the benefits of being part of a larger brand – but the array of consolidators, such as Coleman Wealth, which are helping advisers enhance their proposition, deliver scale, and provide them with new resources to deliver better outcomes for clients.
Regulatory impacts on financial advisories
Increased regulation is a global shift. The EU’s upcoming Retail Investment Strategy for 2025 will impose further value-for-money and inducement requirements for firms on the Continent. In Switzerland, the Swiss Financial Services Act and the Swiss Financial Institution Act have raised the standards for transparency, client protection and licensing, while the United States’ Regulation Best Interest duty similarly requires firms to prioritise the best interests of their clients when making investment recommendations. Meanwhile, the Financial Advisers Act in Singapore has governed the provision of financial advisory services since 2001.
In the UK, the FCA’s Consumer Duty framework is putting increased costs and operational burdens on small firms. Like the aforementioned regulations, the framework ensures that IFAs demonstrate evidence that they are delivering positive outcomes for their clients with their best interests in mind, including compliance checks, product pricing reviews, rigorous tracking and analysis of client portfolios, and governance structures. This can be difficult for small IFAs to have in place, with firms requiring increasing management information for stronger governance and more rigorous oversight, and the FCA’s more recent plans to review consolidation for financial advisers will likely cause further regulatory changes in the sector.
Creating opportunities for wealth manager growth
This changing landscape is creating opportunities for larger and smaller firms alike. Smaller firms can join forces with larger businesses, drawing on these bigger incumbents’ resources and expertise to ensure they can navigate and adapt to the evolving competitive environment and regulatory changes. As well as boosting their financial firepower, smaller adviser firms and wealth managers can benefit from access to more sophisticated financial planning tools and technology that can drive more comprehensive, tailored services, streamlined processes, more robust data security, and enhanced reporting to meet client and regulatory demands.
Consolidation can also help smaller firms become more attractive to potential clients. Joining a more established brand can help them gain access to a broader client base, enabling them to increase their AUM and expand their services, as well as boosting their brand recognition and market profile, and allowing them to access more significant advertising and marketing budgets. Not only does this empower them to reach a wider audience of potential clients and retain current ones, but being acquired can help firms access a larger talent pool and support long-term value creation.
Consolidation provides clients with a global capability
The market is rife with opportunity, generating around £6.3 billion in revenues each year, with record inflows of new capital in recent years. Mid-market businesses, in particular, are benefitting from these inflows, positioning them to gain further market share by adopting buy-and-build strategies – acquiring smaller firms that allow them to access different markets, particularly as independent firms tend to focus on individual regions.
For consolidators, such as Coleman Wealth, strategic acquisitions help us offer an international service to for clients that move around, as well as for advisers to deal with clients across different countries and regions. While based in the UK, our acquisitions allow us to cover Europe, the Middle East, and South East Asia, providing geographical reach without legacy issues. Indeed, we have now completed seven acquisitions over the last 12 months to raise our total AUA to $758m.
As financial advisory and wealth management consolidation continues to gain momentum, firms need to carefully consider their partners to ensure long-term success, and evaluate whether they have the necessary funding, resources, and proven track record to drive sustainable growth for their own benefit and that of their clients.
