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How European WM will fight oncoming fee pressure

How European WM will fight oncoming fee pressure

European Wealth Management remains on the lookout for acquisitions, with chief executive Rod Gentry encouraged by more attractive valuations for targets following the retail distribution review (RDR).

His comments follow the firm’s purchase of adviser Compass Financial Benefits. The deal provides European Wealth Management with a greater presence in the pensions market, alongside a mix of corporate and private client portfolios that will fit easily onto its platform.

‘It gives us another income stream that is not correlated to equity markets and we have the platform in place that it can easily bolt on to,’ said Gentry (pictured).

‘We are seeing a lot of opportunities as there is still fallout from the original RDR, with smaller firms wondering how they can cope. You need to be of a certain critical mass with the regulatory burden, and with RDR II coming along regulation is not getting easier.’

Another by-product of regulatory change is likely to be downward pressure on prices and margins across the board – a trend already taking place in retail and pension fund management. Gentry, a former Wealth Manager cover star, expects this will make life even harder for many wealth management businesses.

His business, having launched less than four years ago, can fare better against pricing pressures due to its lower cost base and freedom from legacy issues compared to some of its peers.

As a result of this there are fewer clients per investment manager, which Gentry hopes will feed through to a higher quality service. This can act as another barrier against downward fee pressure, he said.

‘We have a much lower cost base within the business and we are able to absorb some more of that,’ he said. ‘The decision behind Barclays’ move [to overhaul its sub-£500,000 services] was because it could not make money out of clients because of their cost-income ratio. Without these legacy issues we can be competitive at a lower rate.’

He added the firm has no minimums and has already picked up clients from Barclays as a result of its move to introduce call centres for smaller clients. European Wealth Management is also in talks with a number of potential hires from the bank.

Gentry added the company has a three-pronged growth plan: attracting individuals, acquiring teams and acquiring businesses. He says the third represents the ‘fastest growth opportunity’ and he is encouraged by more attractive valuations for targets compared with the period leading up to the RDR.

‘I think valuations are more reasonable than they were a couple of years ago. They got a bit heady towards the end of the RDR. People were hoovering up acquisitions to achieve critical mass, whereas we will only do deals if we feel they genuinely fit with our business. We are not looking to bolt on funds at any price,’ he said.

He added the firm is also seeing greater opportunities to hire good quality teams right now.

European Wealth Management in numbers:

• Assets under management: circa £750 million

• Asset growth since 2012: £300 million

• Financial planning/investment management business split: 50:50

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