Rushed M&A is nearly always a pretty bad idea, and could lead to some really ill-advised mergers, with clients ultimately paying the price as much as the firms themselves.
The industry remains fragmented enough as things stand, but if the consolidation continues there will be without doubt be a tipping point at which competition is significantly affected and the end investor starts to lose out through having a lack of options.
The identification of this tipping point could be a very tricky task for regulators however due to the nature of the industry and the size of deals being done. We could see the death of effective competition by a thousand small cuts rather than one or two big deals.
A smaller number of bigger firms being the status quo could also cut back sharply on the ‘personal touch’ that many investors value from their wealth manager or IFA as a more ‘one size fits all’ approach creeps in.
Another possible issue with chasing takeovers is that it takes the senior management’s focus away from effectively serving their existing clients. A lot of work goes into a takeover, and every hour spent on the deal is an hour less spent on managing money or client meetings.
One thing is for sure, clients’ interests could easily get trampled in the stampede, and for firms to succeed in the long run they must find a way to do the deals they need to do without this happening.
