Vertical integration in the wealth management space is on the rise as more platforms look to expand by acquiring discretionary fund managers and advice businesses, Lincoln International managing director Antoine Dupont-Madinier has insisted.
“We’re seeing more activity around vertical integration – an emerging theme that hasn’t had much attention yet,” he told Money Marketing.
He pointed out that, traditionally, platforms and advice businesses have operated separately, with platforms on one side and advice-led IFAs on the other.
“But,” he said, “that’s changing.”
“Some IFAs are now integrating discretionary fund managers (DFMs), and some platforms are doing the same.
“In fact, certain platforms that already include DFMs are now expanding by acquiring advice businesses. This marks the emergence of more vertically-integrated players.”
“That said,” he added, “I think it’s harder for IFAs to acquire the tech or platform layer – DFMs are more achievable.
“So IFAs looking to vertically integrate will likely stop at the DFM level. Platforms, on the other hand, find it easier to acquire advice firms and build out three layers of revenue.”
In March, Wealthtime acquired Craven Street and rebranded its group – which also includes DFM Copia Capital – to Quanta Group.
Some of the other platforms are expected to follow suit.
Dupont-Madinier also believes the long-predicted consolidation of consolidators will increase, largely driven by a saturation of private-equity-backed consolidators in the market.
“It has already started, but it hasn’t yet become a major trend,” he said.
Back in December, Titan Wealth acquired Independent Wealth Planners (IWP) for an undisclosed sum.
The deal, subject to regulatory approval, brings approximately £6.6bn of client assets to Titan Wealth, taking its total asset under management to £35bn.
Just last week, Mattioli Woods and Kingswood Group announced plans to merge to create a wealth and financial planning firm with over £25bn in assets under administration and advice.
Dupont-Madinier believes there are more deals to come.
“This is partly due to the nature of the industry – there are now around 40 PE-backed firms. At some point, all the potential platforms are taken.”
He said that, over the past few years, the focus has been on bolt-on acquisitions, which is still happening.
“With some platforms reaching scale, consolidation among consolidators is emerging as a theme,” he said.
“Buyers recognise the appeal of achieving significant growth through a single transaction, while sellers benefit from expanding their pool of potential buyers to include both standalone private equity firms and private equity-backed trade buyers.”
However, he warned, this tactic is not without challenges and risks.
“Some business models simply aren’t compatible – differences in advice approach, client positioning, or adviser remuneration can make integration difficult. You can’t just merge them seamlessly.”
He said cultural and technology challenges remain “significant hurdles”.
“We’ve already seen problems with firms replatforming, even publicly listed ones.
“Merging two large firms with different systems can cause significant disruption if one has to switch to the other’s tech stack.
“So while these deals are far from straightforward, they’re still likely to occur.”
Dupont-Madinier said another factor that may drive this trend is some PE firms preferring to enter the market via smaller platforms.
“This leaves larger platforms with fewer exit options – likely having to sell to a peer or larger competitor rather than another PE investor.”
