The concept of ‘consolidation’ often sparks excitement among investors as it hints at a flurry of profitable mergers and acquisitions. However, the recent forecast of consolidation in the global wealth management sector has received a lackluster response. While American players in the industry have garnered attention, their UK counterparts have been largely overlooked. This presents an opportunity, particularly as Blackrock, a major US wealth management company, believes that British shares are currently appealing, considering that they account for bad economic news. According to PwC consultancy, 73% of wealth managers are contemplating bids or other deals, with one in six businesses expected to be acquired. These predictions come after a near-10% decline in savings entrusted to these professionals last year, falling to $115.1 trillion. This industry is facing existential challenges amidst social, economic, and geopolitical disruptions. PwC suggests that firms that effectively utilize technology, such as generative AI and robo-advisers, establish meaningful connections with customers, diversify recruitment, and provide exceptional client experiences will not only survive but thrive. Consolidation among UK players continues, with Rathbones recently making an £839 million acquisition of Investec Wealth, and Gresham House being acquired for £470 million by US private equity group Searchlight Capital. This development has caused Gresham shares to surge by 55%. However, many of Gresham’s counterparts are experiencing declining share prices. Liontrust, attempting to acquire Swiss firm GAM, has seen a 45% decrease since the start of the year. Jupiter has dropped by 14% to 115p, which is 40% lower than its flotation price in 2010. Ashmore, Brooks Macdonald, and Quilter have also seen their shares dip. These declines may reflect Bank of America’s bleak assessment of the UK asset manager sector earlier this year. Nevertheless, the prevailing notion is that larger asset managers, with assets under management exceeding £100 billion, have a better chance of thriving. For example, Abrdn, formed through the merger of Aberdeen and Standard Life, has seen its shares rise by 25% this year, with assets under management at £367 billion. St James’s Place, despite a 12% decrease in its stock price, boasts an impressive client retention rate of 95.6% and assets under management of £157.5 billion. Hargreaves Lansdown, with £134 billion in assets under management, has experienced a 12% increase in its stock price over the past month, earning it a ‘buy’ rating from most analysts. However, not all agree that this low-cost financial supermarket will be a winner in the long run. Rhea Shah from Deutsche rates the shares as ‘sell’, predicting more downside than upside. This negative perception of Britain’s asset managers seems contradictory considering the aging population and their growing need for investment advice. Dan Boardman-Weston, CEO of BRI Wealth Management, acknowledges the attractive market in the sector due to favorable demographic trends and the increasing demand for savings and investment advice. He believes that trade and private equity buyers will be on the lookout for opportunities. Despite the FTSE 100 edging up by almost 2% this year, fueled by recession concerns, it remains unaffected by the belief held by Blackrock and others that there are bargains to be found in asset managers and other companies. However, this sentiment could shift quickly. Therefore, if one believes that asset managers will prosper from increased demand and succumb to acquisition offers, now may be the time to take a risk. Alternatively, for those seeking more immediate ways to grow their wealth, it is advisable to compare asset managers’ credentials against their competitors on findawealthmanager.com.
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