The outgoing chief executive of Ashcourt Rowan has predicted further consolidation in the wealth management sector, as businesses seek to balance cost pressures and investment needs.
Jonathan Polin, who is set to leave the AIM-listed firm as a result of its recommended takeover by rival Towry, said businesses must harness scale to succeed.
He told The Yorkshire Post: “Everything within wealth management is about scale today.
“We’re seeing pressure on pricing, the regulatory costs are increasing enormously, the cost of acquisition of clients is going up accordingly and you really need to be invested in the very best systems and technology.”
This week, Ashcourt Rowan confirmed it had agreed a takeover deal with private equity-backed Towry Group.
The £97m transaction will create a business with around £11bn under management, making it one of the largest financial planning businesses in the UK.
Monday’s announcement saw the value surge 56 per cent, with further increases leaving Friday’s closing price at [CHECK], up from 168.5p the previous week.
Towry will buy the complete share capital of Ashcourt Rowan, at a price of 270p cash and 5p loan note per share. Mr Polin, who owns 0.65 per cent of share capital in the firm, has made an irrevocable recommendation to accept the offer.
Larger businesses are needed to properly serve customers, Mr Polin said.
He said: “People have got a much higher bar now of what they require in terms of 24/7 communication and access, and to be able to deliver those digital strategies as well as a face-to-face strategy, that takes very significant investment.”
The changes brought in through the Retail Distribution Review have also led to higher customer expectations, he said.
“What RDR has done is made, quite rightly, greater transparency across the industry.
“When you get greater transparency, people question value. If we want to have a profitable business, then we absolutely need to deliver that.”
Wealth management firms have largely been “cottage industries” to date, but smaller businesses can now struggle to keep up, he added.
“It’s a very different world today,” he said.
“You can’t offer the sort of solutions people need and the sort of research you need to do and the product development you need to do from that small base.”
The Towry deal begins to bring to a close a turbulent time for Ashcourt Rowan, with regulatory issues leading to significant restructuring.
Mr Polin was brought in by shareholders in September 2011, with a mandate to “refresh and renew” the firm.
In March 2014 it completed the acquisition of Leeds-based UK Wealth Management for £14m, which was “central” to the strategy, he said.
The Leeds office operates as Ashcourt Rowan’s main hub outside of London, with more than 80 staff. Towry also has a large presence in Leeds, Mr Polin said, which is one of the reasons the merger fits well.
The transaction, which is expected to be completed in three months pending regulatory approval, will see Mr Polin exit, with Towry chief executive Rob Devey heading the joint business.
Looking ahead, Mr Polin hopes the newly-formed business will create a recognisable brand for financial advice.
He said: “People don’t know automatically who to go to for advice. The need for advice is greater today than it’s ever been before.
“People have to do more about looking after their future requirements. That means saving more, means having the right access to savings and having the right products and services at the right costs, so that those charges don’t erode the whole point of saving in the first place.
“All of those things mean that advice is absolutely important and it’s only if you’ve got large businesses that have institutional quality of systems and controls that you can actually deliver that to a wider audience.”