Consolidation is expected to ramp up in the UK wealth sector in 2025, as companies continue to battle rising staff costs and technology expenses, according to bosses and experts.
It was a busy year for M&A in the UK wealth industry in 2024, with 67 M&A transactions worth $10.5bn completed, according to a Boston Consulting Group analysis of GlobalData figures. Among high-profile private equity deals were Hargreaves Lansdown, the trading platform sold to a consortium led by CVC Capital Partners, part-owner of the six nations rugby tournament and the sale of the cyber security business Darktrace to the US investor Thoma Bravo.
Nonetheless, this was down 19 per cent on 2023 when 83 deals were done for a total of $14.5bn, an analysis showed. Bosses in the financial district of London (the area known as ‘The City’) are now predicting that the sector will be a breeding ground for deals this year. Managing director and partner at Boston Consulting Group, Dean Frankle, said this year is “going to be a year of increased M&A”.
He added that consolidation has been “particularly acute” in the UK wealth industry, because of the amount of private equity ownership in the sector. Many owners have held these assets for more than three years so will now be more open to selling.
City wealth firm Evelyn Partners has for years been rumoured to be a takeover target. The firm, which is around £62.7bn in assets, is owned by private equity giants Permira and Warburg Pincus, and sold its accountancy business to private equity firm Apax for £700m in November.
Chief executive officer at Rathbones, Paul Stockton, is also expecting to see more M&A deals in the UK wealth sector this year. The cost of doing business have continued to rise, he said, with wealth managers forced to shell out more money on top talent and technology to scale their businesses and win new clients.
Meanwhile, volatile markets combined with an influx of new regulation, including the Financial Conduct Authority’s Consumer Duty and ongoing advice rules, have squeezed margins further.
Rathbones has been battling to bring down costs since its mega merger with Investec Wealth and Investment in September 2023 and is currently exploring a voluntary redundancy scheme. “It is a hugely competitive industry,” Stockton said. “If you’re in the middle, it’s not a comfortable space to be.” Despite the spike in wealth M&A deals since the pandemic, the market remains highly fragmented. Managing director and head of the financial services group at investment bank Stephens, Hugh Elwes, said there are still a lot of smaller, regional wealth firms in the UK.
Meanwhile, there is a glut of financial advisers looking to retire, but not enough young talent to replace them.
“I reckon that we are only halfway through the consolidation process. There are now 40 different consolidation vehicles, mostly financed by private capital, but there’s a lot of businesses out there,” Elwes said.
Independent Wealth Planners (IWP), which is backed by private capital firm Ares Management, is one of the largest consolidators in the UK, having bought more than 30 Independent Financial Advisors in the country since 2019. It was sold to Titan Wealth in December after accruing a significant debt pile.
Quilter boss Andy McGlone expects consolidation will continue among the smaller firms in the market, “but I wouldn’t anticipate a significant increase from what we’ve observed in recent years.” He added that the advice giant has been more focused on organic growth in recent years, but remains “open to the right opportunities as they become available”.
The author is our foreign correspondent based in the UK
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