The advice market is still continuing to be rife with M&A deals across the UK.
But one region in particular has become an area of interest for businesses in the industry.
Since October 2022, International Adviser has reported on many deals surrounding Scottish advice firms – with acquirers being Scotland-based but also UK-wide giants.
Wealth companies like Kingswood, Advanta Wealth and One Four Nine Group have recently made acquisitions in the country, as well as local St James’s Place partner firm Gilson Gray Financial Management and AAB Wealth.
IA spoke with Progeny, GSB, Core-Asset Consulting, Openwork and Blacktower about Scotland becoming a financial advice powerhouse.
Affluent country
Despite many stereotypes towards the country, Scotland is very affluent and has pockets of vast wealth across it.
In 2016-18, households in Scotland had just over £1trn ($1.24trn, $1.14trn) in total wealth.
Claire Limon, director of learning and acquisition at Openwork, said: “The Scottish have long held a reputation for treating every penny like a prisoner, and sounds like we’re becoming increasingly fiscally aware… However, joking aside, I think the impact of the Scottish Parliament flexing its muscle on its devolved power to vary income tax in Scotland has had a big impact.
“Although it’s always had the power to do so since 1998 when the devolved parliament came into force, it didn’t exercise this power until April 2017. Since then, Scottish Parliament has continued to introduce different bands and different rates, compared to the rest of the UK.”
Rob Aberdein, chief commercial officer at Progeny, said: “Aberdeen is the oil and gas capital of Europe and Scotland is a leader in renewables and global centre of excellence for technical knowledge for the energy sector. The output is a vast diaspora of global high-net-worth individuals with either a Scottish base or a Scottish link. Ambitious and perceptive advisers will want to set up to support, guide and advise them and their families where they are and wherever they go next.”
Dean Kemble, chief commercial officer at GSB, added: “We have seen an influx of international corporates base their European headquarters in Scotland over recent years. Scotland is a fundamentally entrepreneurial country with a highly skilled workforce which boasts a number of outstanding universities. Thus, it is no surprise that Scotland has become a centre for technological and financial expertise.
“Edinburgh has long been a banking and financial centre and has a global reputation for excellence. We have similarly witnessed the development of Glasgow as a key financial centre. Thus Scotland, although geographically small, has quickly become a concentration of highly skilled individuals within highly experienced, developed firms.”
M&A haven
Deals in Scotland between advice firms show no sign of stopping and is quickly becoming a battleground for consolidators.
Progeny’s Aberdein added: “Scotland is a uniquely attractive market for M&A activity in the financial advice and professional services sector.
“Strategically, it could be viewed as a territory that’s been underserved by financial advice, with competition for clients not at the same level as it is in England or the wider UK, which can help make it an enticing prospect for firms seeking to expand or grow their presence.
“Many of the bigger, acquisitive businesses in the financial advice sector are based in England and initially focus the majority of their M&A activity closer to home where they are more comfortable.
“When they are ready to extend beyond these boundaries, either within the UK or as a stepping stone to international ambitions, Scotland is often the obvious next move.”
Expansion
So, should more advice firms look towards Scotland as a hub for growth?
Betsy Williamson, chief executive at Core-Asset Consulting, said: “The past few years saw some radical changes within the financial sector. Scotland has experienced a great jobs surge, especially in wealth management, with national firms setting up regional hubs north of the border.
“On another hand, Scotland employs more than 100,000 people directly in fund management and indirectly via an extensive supply chain of service providers spanning institutional middle office and back-office administration, retail administration, legal, accounting, finance, IT, investment consulting and operational support services.
“In 2021, assets managed in Scotland peaked at £700bn, a small increase on the preceding year. This equates to 7% of total UK assets under management, by no means an insignificant number, making Scotland a financial hub and an attractive location for the advice market.”
John Westwood, group chairman of Blacktower, added: “It can be easy to overlook locations such as Scotland in favour of more established financial hubs such as London when prioritising operations as an advisory firm. However, these oversaturated markets can pose equally, if not more significant issues, than areas with lower population densities as competition puts pressure on companies to outperform rival firms for business.
“The fallout of Covid saw a considerable percentage of the population move away from larger cities to more rural areas, taking their substantial earnings with them. Scotland’s household wealth now amounts to over £1trn.
“This is only set to increase with the implementation of Scotland’s Inward Investment Plan, the UK government’s Levelling Up initiative, and the increased levels of foreign investment seen in the past few years.”
