Why are Brewin and Collins Stewart piling up so much cash?

Amidst a slew of results put out by Brewin Dolphin, Rathbones and Collins Stewart over the last 24 hours, one of the things that seems have to have gone off the journalistic radar is that all of these companies are hoarding some serious cash.

In its interim statement, Brewin revealed a cash pile of £56 million while Collins Stewart is sitting on £75 million.

Now, the obvious question is 'why?' and the even more obvious answer is that they are building up ammunition for an acquisition spree. Collins Stewart has come out and said it has ambitious plans in the wealth management space and it recently bought Andersen Charnley.

However, I find it difficult to believe acquisitions are the only reason, mainly because they have been piling up large amounts of cash for quite some time and they chose not to use it during the height fo the credit crunch when the valuations of some of their rivals were significantly lower. Admittedly though, the risk of making an acquisition in such uncertain time was also significantly higher.

Brewin, meanwhile, has said the main reason for having such a large amount of cash is to firm up the balance sheet and be well above the capital adequacy requirements.

RDR

However, I suspect there are other issues at play influencing Brewin to keep its powder dry.

First of all, the retail distribution review is coming. Now, Brewin has stated on numerous occasions that it is amongst the best prepared wealth management businesses to deal with the changes.

But if that is the case, it will no doubt appreciate the fact this is a monumental change and for a business of its scale, any changes are expensive.

Graham Harvey, a director at wealth consultancy Scorpio, believes Brewin may be putting that cash aside for further training ahead of the RDR.