* Rash of deals this week unlikely to be the last
* Deutsche Bank eyes really rich; Pictet, Berenberg expand
* Rathbones chalks up two more deals, Jupiter exits
* Thurleigh, Ingenious merge
By Joshua Franklin and Simon Jessop
LONDON, April 4 The fragmented UK wealth
management sector is shrinking as firms quit, bulk up or look to
service a more profitable slice of the country's growing number
of rich clients, to cope with costly new regulations.
There were 147 firms managing 554 billion pounds ($918.92
billion) of business in the sector, including private banks,
private client investment managers, full service wealth managers
and execution only brokers, at end-2012 according to industry
data provider ComPeer.
This week saw Rathbones Brothers, Jupiter Fund
Management, Pictet & Cie, Berenberg Bank and Deutsche
Bank's fund arm all shaking up their operations.
New rules brought in last year, as part of global efforts to
make markets safer, are squeezing the profits of the smaller
players in particular. Wealth advisors have to take more exams
and systems must be in place to monitor client accounts.
Commission based selling was also banned.
"We see the business is becoming more regulated and the cost
of that regulation is the same for a 300 million pound firm like
ours and a 3 billion pound firm, and so you need extremely
robust processes in place," said Charles MacKinnon, chief
investment officer at Thurleigh Investment Managers.
"To be a mom and pop sitting in one room is no longer viable
for this business," MacKinnon added, in the week it agreed to
merge with Ingenious Asset Management to create a firm with 1.8
billion pounds in assets.
Total compliance spend in the wealth management sector rose
10.7 percent to 153.5 million pounds between 2010 and 2012,
"This (regulation) puts pressure on the smaller players
particularly," said Numis Securities analyst David McCann. "The
large players have the advantage that they have the fixed costs
largely covered already."
Among the deals this week Rathbones bought some assets off
Deutsche and Jupiter, looking to sell more generic products to
the "mass affluent".
Deutsche Bank decided to focus on tailored investments for
ultra-high net worth and high net worth clients - worth $100
million-plus and at least $1 million respectively, according to
the Boston Consulting Group.
"It's about volume versus margin," McCann said. "The larger
customers are likely to be much higher margin but there are just
fewer of them. Both models can work."
Jupiter decided to exit the sector completely and instead
focus on its core mutual fund business, while both German
private bank Berenberg and Swiss private asset manager Pictet &
Cie, said they would expand their London-based operations for
the super rich.
In the past RBS-owned private bank Coutts has been
rumoured to be up for sale, but new RBS Chief Executive Ross
McEwan has committed to keeping and growing the business
London is where most wealth managers will seek to retain a
presence, given it has more dollar millionaires than any other
city in the world, at 339,200, research firm New World Wealth
"London is very much seen as a place where wealth is growing
and that by definition should encourage wealth managers to have
some sort of operation here," said Stuart Duncan, analyst at
"A lot of wealth managers, not just Rathbones, would like to
take advantage of the opportunity to consolidate the market
because there are a lot of smaller wealth managers around."
($1 = 0.6029 British Pounds)
(Editing by Elaine Hardcastle)