Q1 in UK wealth management beyond the M&A hype
The Rathbones - Investec Wealth & Investment deal has dominated headlines. But the organic growth trends of wealth managers & platforms is just as important. Leaders and laggards are emerging.
Following a tough 2022, most UK wealth managers and platforms enjoyed a relatively strong Q1-23. Some are clear leaders. But a few are struggling to extract themselves from the ‘laggard zone’.
[For a reminder of what went down in 2022, see my previous post.]
All companies in the peer group reported growth in their total assets under administration or management (AUA).
But underlying the overall positive picture, are some distinct differences in fundamentals. The most important is probably the variation in net flows (new client capital less client capital withdrawals).
Solid quarter for platforms
PensionBee, the pensions-only fintech disruptor, is clearly an outlier in the above chart, and although it is certainly smaller and an earlier stage company than the others in the group, it maintained its impressive AUA and new client growth momentum.
Net flows totalled £233m in Q1-23 (bringing total AUA to £3.4bn) and it added 15k net new clients (8% client growth in the quarter) bringing its total client base to 198k. In 2022 its net flows totalled £863m and it added 66k net new clients.
The closest comparators to PensionBee are the other platforms, AJ Bell (AJB) and Hargreaves Lansdown (HL), although they are larger, more mature businesses and offer general investment products (ISAs, investment accounts etc) as well as pensions.
AJB also had a strong quarter, recording £1.3bn of net inflows (bringing total AUA to £74bn) and added 21k net new clients (5% client growth in the quarter bringing its client base to 470k). In 2022, its net flows totalled £3.2bn and it added 51k net new clients.
HL, the largest incumbent platform by some distance recorded £1.6bn of net inflows (bringing total AUA to £132bn) and added 23k net new clients (1.3% client growth in the quarter bringing its client base to 1.79m). In 2022, its net flows totalled £4.8bn and it added 75k net new clients.
Mixed picture for wealth managers
Among more traditional wealth managers, Brooks Macdonald (BM) was the clear leader when it comes to organic growth rate (net inflows as a % of opening AUA) in Q1-23 with a quarterly rate of 2.3% (net inflows £373m, bringing total AUA to £16.8bn).
This continues BM’s positive momentum of the last few years with its 8th consecutive quarter of postive net flows. In 2022, its net flows totalled £806m, an annual organic growth rate of 4.7% (3rd highest amongst the above group after PensionBee and SJP).
SJP and Evelyn recorded organic growth rates of around 1.3% for the quarter (£2.0bn of net inflows for SJP bringing AUA to £154bn; £673m of net inflows for Evelyn bringing AUA to £54bn). In 2022, SJP recorded a very strong organic growth rate of 6.4% and Evelyn a respectable 4.0%.
However, Quilter and Rathbones continued to lag wealth management peers with net inflow rates of 0.3% and a touch under zero respectively in Q1-23. This follows lagging organic growth rate performances in 2022 also (1.6% for Quilter and 0.6% for Rathbones).
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Disclosure: At the time of writing, Paul Bryant was a shareholder in a number of the companies mentioned in this publication, and covered PensionBee and Brooks Macdonald as an analyst on behalf of Equity Development Limited. Read Equity Development’s research on PensionBee here and Brooks Macdonald here. Please read this link for the terms and conditions of reading Equity Development’s research.