Private equity firms are not seeing as much value out of their initial investments as they thought they would, according to Matt Jeffery, associate partner at Wavestone.
Speaking to FT Adviser, Jeffery discussed what he expected to see happening within the wealth and advice space in the coming months.
Jeffery touched upon M&A in the market and did not see the rate of it slowing in the £100mn to £500mn space.
“There’s the interesting part around how the market might be shaped by the end of the year, which is due to the PE cycles coming to an end, and people running towards the end of their cash.
“The second side is, we will see interesting strategies around how best to build the businesses, because valuation techniques will probably change slightly, because PE firms in general are not realising the value out of their initial investments as much as they thought they would.
“So improving what the operating model looks like, optimising cost and creating interesting add-ons to those businesses to improve the top line is what we could see happening,” he explained.
Adviser-as-platform
Jeffery highlighted how adviser-as-platforms were “still hugely prevalent” as firms looked to try and add another revenue stream to their business but also take greater control of the customer experience.
“It’s about having the potential of owning some of that client experience, front end and the servicing, in terms of the responsibilities that the business takes on. That’s definitely very prevalent and doesn’t feel like it’s letting up,” he added.
In terms of whether we would see more adviser-as-platform propositions cropping up, Jeffery believed there were pros and cons to firms looking to offer this.
He said: “If firms are looking at it in terms of ‘we can take on this responsibility, and we can offer it maybe cost plus’, it’s not a massive revenue driver. But what we are doing is bringing the control of this stuff back in house.
“So we’re possibly creating straight through processing from the kind of core back office and advice engines into the platform and then into the investments, therefore creating efficiency.
“Some firms we’ve worked with have offered that pretty much at cost, so it just becomes part of the advice ecosystem that the firm is building. That way is potentially really, really positive.”
On the other hand, Jeffery mentioned the risks and the controls that needed to be in place in order for firms to be able to offer this proposition.
“There are risks certainly around the controls and the operating model. Some firms have steamed into this quite quickly and realised that actually really boring stuff, like legal entity structure and a conflict of interest register, needs to be locked on before you even start to think about some of the more interesting stuff.
“If there is a mentality shift of actually the adviser-as-platform almost becomes the retail adviser platform of 15 years ago, then we might see a real wholesale shift.
“If the regulator gets really hot on this, and actually there’s deemed to be a kind of more significant risk than is currently thought about adviser-as-platform, then potentially it slows down slightly,” he suggested.
Social media
Jeffery said he was definitely having informal conversations with chief executives of firms about the threat of non-qualified influencers .
“What I am seeing is this switch flicking in people’s minds that actually, having a crest with a lion on it and being called something regal doesn’t give you the license to just go after any clients that are out there anymore. You need to be targeting your propositions, branding and marketing.
Forward thinking firms do have a presence on the major platforms, but very few have differed the brand message based on the platform they’re using
“So lots of firms are having that conversation and asking the question are we actually in the 21st century right here? Are we set up, not just from a proposition perspective, but from a marketing perspective to deal with the intergenerational wealth transfer that everybody is concerned about?” he explained.
Jeffery believed social media was something not enough firms were taking seriously enough.
He added: “The really forward thinking firms do have a presence on the major platforms, but very few have differed the brand message based on the platform they’re using. So something that you post on LinkedIn is potentially very different to something that you post on TikTok and on Instagram.
“So as wealth transfer continues to take place, we will hopefully see more of a differentiation in the messaging that’s going out there, where money is moving into different people’s hands.”
alia.khan@ft.com
