Financial planning firm Saunderson House caught the eye of wealth management firm Rathbones on Wednesday (25 June), leading to a £150m deal. The acquisition will increase Rathbones’ financial planners from 25 to 80, also adding 2,200 clients with an average portfolio size of £2.2m.
The deal will strengthen Rathbones’ financial planning capability in the professional services arena, namely servicing lawyers and accountants in London and the South East. While Saunderson House’s investment clients will benefit from stronger adviser investment propositions, research capabilities and ESG expertise in due course, Rathbones said.
According to Paul Stockton, CEO of Rathbones, motivation to go for the Saunderson House deal stemmed from increased demand in financial planning.
“We were fortunate that a high-quality specialist business which fits our culture became available” he says. “Conversely, one of the reasons why Saunderson House liked Rathbones was because of the strength of our investment propositions for advisers and the level of resource we can bring to that.
“Saunderson House focuses on large accountancy and legal firms and supplements our focus on our clients who may require financial planning services in future. Professional services firms are a very strong sector of the wealth market, and Saunderson House has a strong brand and great reputation within that.”
He adds that clients appreciate the optionality the firm offers, either through its advice or investment propositions, and it differentiates itself through being flexible.
“An absolutely critical part of our strategy ,” he continues, “is growing our business through support from UK and international advisers, for whose clients we run over £20bn, and remain committed to this core element of our strategy.”
An enhanced customer experience
Both Rathbones and Saunderson House, naturally, are keen to provide an excellent service to clients, as well as build long-standing client relationships.
Minesh Patel, a chartered financial planner, says creating a better client experience should be at the forefront of every consolidation.
“Rathbones gets a first-class financial planner and further scope for distribution, while Saunderson House can further propel its client development experience,” he adds. “This is a massive scope for investment capability and it’s a win-win for both parties.
“A centralised investment process that is led by an award-winning financial planner and a world-class financial management will create an excellent customer experience.”
Darius McDermott, managing director at Chelsea Financial Services, shares similar views, and brands the merger a good deal.
“For Rathbones this is a good addition; not only does Saunderson House have a strong reputation, but it is also consistent in professional services, a key area that Rathbones wanted to grow in,” McDermott says.
“It is worth noting that in every financial services business there is an increasing regulatory burden and costs, and there is clearly economy of scale too,” he adds. “Consolidations can help to alleviate this.”
Consolidations a popular trend
In 2020, the UK financial services sector was the fourth-leading merger and acquisition industry in terms of volume. Despite the pandemic, many advice consolidators have continued down the acquisition trail as deals big and small in size complete on a weekly basis (four were announced last week alone).
“Consolidation in the wealth management industry has been going on for some years, although at the same time there has been individuals looking to go it alone or using partners, such as Raymond James,” says investment specilist and independent commentator Adrian Lowcock.
“The increasing regulation and compliance requirements mean that the risks of wealth management are much greater and therefore there are benefits to consolidate and streamline systems. Firms can have larger compliance functions, and benefit from economies of scale.
“Costs have been increasingly in focus and consolidation can help bring those down for the company as well as clients, potentially.”
Giles Dunning, an M&A expert and partner at Stephens Scown, adds: “After a disrupted 2020 we are starting to see more activity in the M&A market again. With pent up demand from owners unable to sell during the pandemic, many acquirers competing for good quality firms and no shortage of funding, we can expect to see more deals as the year progresses.”
Philip J Milton Chartered financial planner Felix Milton describes the deal as a “hefty one” and reckons these sorts of acquisitions will continue.
“There still seems to be a huge appetite for consolidators at present with a lot funds chasing a few firms which is resulting in these high value takeovers,” Milton says, “especially with these valuations making it very attractive for firm founders to sell at.”
Handford Aitkenhead & Walker Chartered financial planner Laura Ripley says it was an expected move from Rathbones as it was earmarked for further growth. That said, she observes the acquisition as “a bit of shame” as another “boutique” firm stretches for more scale.
“[It’s] an expected move by Rathbones as growth was planned. it is always tricky at that level and the previous Smith & Williamson merger discussions were well publicised but if the cultures of the two companies are aligned this could be a great move for Rathbones to add scale and reaching the top three UK wealth managers,” she says.
“Restructuring will no doubt follow as they’ll look to make cost savings by aligning operational process and resources. We might see an uptick in these as we emerge from the pandemic as managements reset their focus to the longer term.”
She adds: “At the smaller end of the scale, it is a shame to lose some of the more boutique firms but in this industry, the regulatory framework can make it difficult to continue with significant scale.”
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