Acquirers are focusing on upgrading investment propositions which will have a wider impact, a report has found.
NextWealth’s consolidators and aggregators report found mergers and acquisitions are continuing to drive change in the advice market.
This year’s report included profiles of 25 acquirers that have made significant purchases over the past four years.
Across the profiles, NextWealth analysed whether firms have in-house capabilities across functions including: platform, fund management, portfolio management, technology and professional services.
It found 84 per cent of firms had in-house model portfolio services and 68 per cent had an in-house range of funds.
Several stated their current focus is on upgrading their centralised investment proposition (CIP) and that they are open to working with investment partners to develop in-house fund and portfolio ranges.
Heather Hopkins, managing director at NextWealth, said: “Acquirers are becoming increasingly vertically integrated offering a range of services to simplify the operating model and improve profit margins.
“Acquirers are refining their investment proposition to ensure it is competitive and attractive for acquired advisers and their clients.
“These steps towards vertical integration will have a much broader ripple effect across the industry, forcing platforms, asset managers and DFMs to develop new ways of working with these firms.”
The report is based on analysis of deals taking place between Q1 2021 and Q1 2025.
It also highlighted the pace of acquisition fell marginally in 2024, with 127 publicly announced deals compared to 134 in 2023.
Despite this, the value of deals was significantly higher due to the acquisition of several firms with over £1bn in assets under administration by acquirers such as Titan Wealth.
It also found the cost of acquiring firms has doubled since 2021, increasing from three to six times Ebitda in 2021 to six to 12 times in 2024 – an upward trend that is likely to continue.
It confirmed that over 30 private equity firms are invested into financial firms and private equity interest in financial services will continue.
Hopkins said: “Over the next 12 months we expect the 2024 trend to continue with a slowing in the number of deals but the value of deals growing.
“A growing number of PE firms will look to exit positions and we’ll see the rise of consolidation of consolidators.
“In our interviews with consolidators we consistently heard that firms have a healthy pipeline of acquisition targets and we expect this trend will continue to reshape the UK wealth market.”
Last year, the report highlighted that acquirers in the financial advice market were increasingly looking at consolidation not aggregation and factors driving this change included mounting costs of doing business (particularly regulatory costs), pressure on the ongoing advice charges and the rising cost of borrowing.
sonia.rach@ft.com
