Bigger is better, might makes right, size matters, scale is king. The flurry of M&A activity across the retail-investing supply chain in 2019 could easily lead one to the conclusion that heft is the way forward in retail investing. Consolidators continued to swallow up financial advice businesses; Embark bought Alliance Trust Savings and Zurich’s adviser platform businesses; and fund groups sought scale through mergers (notably Miton and Premier).
Although many of the recent mergers and acquisitions were about increasing one’s size, we believe there are not one but three drivers of consolidation:
- Strategic imperative to future-proof a profitable but low or negative growth business
- Scale to address increased cost (regulation and technology in particular) and fee pressure
- Adding capability, such as portfolio management or distribution
One of the more interesting deals of 2019 was the merger of Tilney and Smith & Williamson. The deal delivers scale but also diversifies capability for those businesses. At NextWealth we are firm believers that businesses can succeed that are sub-scale — but they need to be differentiated on more than just price. We expect more M&A activity in 2020. Though some deals will be driven by scale, a few potential tie-ups that are whispered to be on the horizon are more about adding capability that will lead to new business models.
The shape and substance of these future business models will be explored at NextWealth Live on 24 March (shameless plug klaxon: register before 31 January to take advantage of our early bird discount). In our opening panel, Peter Mann will chair our CEO panel with Andy Bell (AJ Bell), Andrew Formica (Jupiter), Ruth Handcock (Octopus) and Richard Wilson (Interactive Investor). Later in the day, Tina Weeks from Serenity Financial Planning will make the case that financial wellbeing can be adapted to larger financial advice businesses.
The success of retail investing is entirely dependent on customers entrusting their money to us as an industry — if they can understand the turgid prose we use to explain our offer. So we are very pleased to announce that Carl Richards from Behavior Gap will be sharing his cartoons and insights at NextWealth Live. At the time of the RDR the FCA coined a terrific term “the overcomplexification of financial services”. Carl is skilled in simplifying the complicated and will challenge us to think differently about how we speak to our customers and how we help them make better decisions.
We’ll also explore the rise of microservices and the future of platforms, hear real-world data integration case studies and stretch our thinking on the future of the product and sources of flow. Kenneth Cukier, a senior editor at The Economist and a New York Times best-selling author rounds out the agenda making the case for curiosity in business and life.
We hope you’ll be part of the community on 24 March at the splendiferous Royal Institution in Mayfair, London.