There have been a number of M&A deals in wealth management in the UK, and one player in the scene is Canaccord Genuity Wealth Management. We talk to its chief executive about its business, strategy and thoughts for the future.

The wealth management sector in the UK is consolidating, with more deals likely – although some transaction momentum appears to have peaked for the time being, the CEO of Canaccord Genuity Wealth Management says. 

The highly fragmented sector is witnessing a mass of deals, not just in the UK but also in countries such as the US. Rising costs and client expectations – forces in play before Covid-19 hit more than two years ago – are driving deals. 

At Canaccord’s UK business, the firm is making deals of its own, recently opening an office in Edinburgh after it bought Adam & Co. It is also adding offices in Birmingham, Guildford and Newcastle via its purchase of Punter Southall Wealth in 2022.

“There will be more consolidation in my opinion. It’s been a busy period for M&A activity in the wealth management sector, but I think that reached a peak at the end of last year and we will see it level out a little. The cost of business is increasing for wealth managers, driven by inflation as well as rising technology and regulatory costs and, in that scenario, small businesses might want to sell,” David Esfandi told WealthBriefing in an interview.

Esfandi brings plenty of perspective to the conversation. He has been in the post since March 2014, leading the business in the UK, Jersey, Guernsey and the Isle of Man. Before this role, he was managing director of Ashcourt Rowan Asset Management and prior to that, he spent a decade at Deutsche Bank. Esfandi started out in financial services at Goldman Sachs International as a financial analyst.  

In one or the largest UK wealth sector deals for several years, in early May, Royal Bank of Canada announced that it had agreed to make an all-cash purchase of the UK’s Brewin Dolphin in a deal valuing the latter at about £1.6 billion ($2.1 billion). Recent years have seen developments such as Lloyds Banking Group’s wealth joint venture with Schroders, the Tilney/Smith & Williamson merger, Old Mutual Wealth's purchase of Quilter Cheviot, and JP Morgan’s purchase of Nutmeg, the robo-advisor platform.

Business model
CGWM doesn’t have a relationship manager model. Instead, the investment managers and investment directors, who manage their clients’ portfolios, are responsible for their own client relationships. “They are the people clients pick up the phone to,” Esfandi said. “They are fully supported by the centralised investment team but we find this direct relationship much more effective – and our clients are happier for it as they know who is responsible for their investment selection/performance and can ask questions directly.”

Esfandi says the career longevity of many of the CGWM staff is a source of pride.

“Among front-office colleagues there are many people who have been at the firm for 10, 15, 20 and 30 years or more, building continuity and the sort of peace of mind that it brings to investors,” he said. 

“We have a new generation of clients we have to appeal to. The industry has been far too frugal in spending on tech and we have to appeal to the next gen’s customer experience. We are doing a lot of work on our hybrid offering. We have to do that,” he said.

“We are very clear that we are an integrated wealth manager, meaning we provide both investment management and financial planning services for our clients. Our clients are facing ever more complex investing and financial planning challenges and we focus on delivering the blend of specialist expertise they need under one roof,” Esfandi continued. 

“We’re really ambitious about building our hybrid model – enabling clients to select the combination of digital self-service (such as electronic onboarding or suitability paperwork) and personalised guidance from a wealth manager that is right for them,” he said. 

“CGWM’s specialisms appeal to a broad range of clients, whether that’s our UK small cap equity expertise, our US service, our ESG portfolio service, global equities or the inflation plus service we will soon bring on from Punter Southall Wealth. From acquiring firms like Punter Southall Wealth and Adam & Co we are able to broaden our specialist areas,” Esfandi continued. 

A large challenge for wealth managers is framing clients’ expectations, especially in times when inflation erodes wealth.

“It's about honesty and good communication. For all wealth managers, the prospective scope for returns is narrowing. This is against the backdrop of high inflation, increasing interest rates and the economy facing a few tough years ahead. That said, the need for financial planning and investment management solutions has never been greater – and we remain calm and focused on steering our clients through these difficult times,” Esfandi said. “Being open and informative is the only approach to have with clients – we hold regular client webinars with our team of experts and produce a lot of accessible content that explains to clients what is happening in the markets and why. We need to provide them with the reassurance that although we are experiencing volatility, their money is in safe hands.”

WealthBriefing asked Esfandi what he might have done differently with the benefit of hindsight. 

“I think if I could go back in time, I might have invested more in technology a bit sooner and accelerated the expansion of our financial planning business earlier. It would have been nice to have a crystal ball to predict just how pivotal financial planning would be for us. But we’re in a good space now and are set to double the size of our financial planning team when Punter Southall Wealth comes on board,” he said. 

Esfandi is in expansion mode. The Middle East came up in the conversation.

"Our international funds business is doing really well and we have had good traction in the Middle East. With that in mind, we are exploring the concept of expanding our footprint in the region – nothing is set in stone, but we consider it to be a growth area,” Esfandi added.