Wealth and asset management consolidation
In search of yield and new growth opportunities, there has been increased demand for the acquisition of alternative asset managers
In a competitive Canadian wealth and asset management market, acquirers continue to purchase alternative asset managers focused on private debt and private equity, as well as those running specialized or differentiated strategies. Strong investor demand and higher expected returns make alternatives an attractive option in an environment of low management fees, low interest rates, and increasing competition.
Six trends fuelling Canadian wealth and asset management M&A activity
- Competition and cost pressures: Management fees are declining and a growing list of FinTech companies and non-traditional competitors are entering the industry.
- Need for scale and distribution: Salaries and fund administration costs are fixed, driving the need for scale.
- The drive for new capabilities: With respect to operations, investors now expect modern and personalized digital wealth management services. On the investment side, asset managers are seeking capabilities in areas with higher potential returns such as alternatives.
- Shifting value chain: Asset managers are considering acquiring wealth managers to grow revenues by offering additional services to clients to expand share of wallet.
- Low organic growth: Median and average three year revenue CAGR for Canadian asset managers are 2.3% and 7.4%, respectively.
- Succession planning: As wealth managers and advisors retire, there are opportunities for asset managers to acquire clients, AUM, and new service offerings.