M&A activity among small UK IFA firms is set to increase over the next two years, according to the majority (55%) of advisers polled by Investec Wealth & Investment. Over a third (37%) forecasts a rise in M&A among larger firms too as the industry continues to consolidate at pace.
The main driver behind this, according to 42% of respondents, is owners looking to sell their businesses in order to retire or semi-retire. With almost a third (30%) of advisers planning to sell their business entirely on retirement, the research suggests there will be a steady stream of new firms coming on to the market over the coming years.
According to advisers, the second and third key factors behind the rise in M&A are the role of technology in creating more efficient business models (34%) and the evolving regulatory landscape (33%) respectively.
Advisers said the biggest factor influencing their decision on which firm they would sell to is ensuring they would maintain a high level of client service. This was followed by securing the best financial return and the possibility of remaining involved in their firm on a semi-retired basis.
“M&A in the IFA sector will continue apace over the next few years as advisers belonging to the baby boomer generation will be looking to hang up their boots. When you add the impact of new and more complex regulation and better technology you have an ideal environment for consolidation,” said Mark Stevens, head of Intermediary Services at Investec Wealth & Investment.
“In our experience M&A activity inevitably leads businesses to conduct a thorough review of their business operations and this often results in a decision to outsource the investment management process to a reputable specialist with the expertise and scale required to provide a high quality service to an expanded client book,” Stevens said.