This week thewealthnet published data from PAM which revealed the top 20 private asset managers in the UK and Crown Dependencies by assets under management (AUM). This attracted significant interest and prompted some engaging discussions. One question I have been considering is why are we so focused on AUM?
Does being the biggest equal being the best? I am sure most would argue it does not. However, this does not stop some wealth managers from serially hunting for assets and scale. Indeed, around half of the firms featured in the top 20 have made a significant acquisition and/or merger in the past three years.
Most notably, Rathbones jumped from seventh place to second following its “combination” with Investec Wealth & Investment (UK). While asset gathering was not the sole aim of this deal, “scale” was cited as a significant reason in the materials that accompanied the deal announcement.
With an AUM of over £90 billion, Rathbones has secured its spot as the second largest UK wealth manager and is almost £20 billion clear of Barclays in third place.
Some might question what this will mean in practice.
Cost reductions and efficiencies are relatively likely, while combining two investment propositions could well lead to an improved offering if both teams share expertise.
However, it seems unlikely it will automatically help attract new clients. Size may play a factor in some people’s decision making but, even with greater scale, Rathbones is yet to become a well-recognised brand to those operating outside the industry.
Another observation is that “scale” is relatively difficult to achieve in the UK wealth management sector. Only one firm (St James’s Place) has AUM of over £100 billion, while a further six firms have AUM of over £50 billion.
To make the top 20, an AUM of just over £17 billion was needed. Given there are over 300 private asset managers operating in the UK and Crown Dependencies, this suggests that so-called scale is alluding the vast majority.
For some, this seems deliberate. thewealthnet regularly covers boutique firms, many of which stress their desire to remain as such. To these, being bigger just means more bureaucracy and restrictions on investment approach.
On the other hand, some stress that bigger clients need the security of a larger firm to feel comfortable depositing their assets.
Whether or not bigger means better for wealth managers can probably only truly be determined by comparing investment performance across firms of different sizes.
Perhaps that’s another table for us to be working on…
