Consolidation within the UK wealth management and financial advice industry is here to stay and will last for a while, according to global strategy consultancy LEK Consulting.
The firm found that the £2trn ($2.6trn, €2.4trn) sector, which currently boasts around 28,000 advisers, will see high M&A activity for at least another decade, as private capital continues to find opportunities in the industry.
The attraction to the UK wealth and advice space is mainly driven by two factors, LEK said:
- Continued market growth, considering that asset growth, wealth creation and opportunities in yield management have continued to rise since 2017 despite the pandemic; and,
- Growing industry profit pools, with regulation, private capital and technology shaping the sector’s business models enabling significant value creation.
Bronswe Cheung, principal at LEK Consulting, said: “Value-creation opportunities remain significant for both current and new participants in the UK wealth management industry. The industry remains in a state of flux and business models continue to evolve, but many businesses still lack agility and sophistication.
“Customers are often exposed to a ‘one size fits all’ approach that is neither desired by the client nor optimal for the provider. The full power of technology to harmonise business processes is also still to be realised. Vertical integration potential is not fully harnessed either. These areas represent as much an opportunity as a threat to current market participants.”
Eilert Hinrichs, partner at LEK Consulting, added: “In addition to vertical integration and consolidation, the need for organic growth will only be amplified in the coming years as private capital seeks exits.”
