Behavioural finance experts, Oxford Risk, are predicting a big rise in the long-term level of M&A activity in the UK wealth management sector as companies plan to scale up and enhance their digitally enabled delivery models.

Latest analysis of industry data by Oxford Risk released on Friday reveals that the combined value of assets under management of UK wealth managers acquired in 2022 was £137 billion ($171 billion), compared with £87 billion for those acquired in 2021.

Oxford Risk said the wealth management sector is facing huge disruption from the growth of potential new customers, new delivery models and increased regulation. “More wealth managers are looking to capitalise on these changes by scaling up and investing in digital and analytical capabilities to offer differentiated and market-leading services,” it continued. 

The firm expects more cases of large financial services' companies entering the growing wealth management sector through acquisitions. It also believes that as clients demand greater access to alternatives and private market investments, more wealth managers will consider making acquisitions in this area as well, or at least more strategic partnerships.

Greg B Davies, PhD, head of behavioural finance, Oxford Risk said: “One of the key challenges for any post-merger integration is to ensure investors across the combined entities are getting a consistent high-quality experience and robust suitability assessment.” 

“We are therefore seeing significant growth in demand for our services from wealth managers to help them assess the drivers of inconsistency in their advisor population, understand their investors better, and offer them the best fit in products and services,” he added. 

“Given this, one trend we may see more of in wealth management is larger wealth managers and financial institutions purchasing investment platforms as with abrdn’s purchase of Interactive Investor,” he continued.

Oxford Risk’s behavioural tools analyse investors’ financial personalities and preferences as well as changes in their financial circumstances which, supplemented with other behavioural information and demographics, enables them to build a picture of client suitability.