Market insight: The financial services sector

Continuous growth is the unequivocal trajectory for the UK’s financial services and wealth management market.

We are referring to companies that provide financial planning, investment management, banking, insurance, retirement planning, tax advisory and estate planning services to individuals, families and businesses.

Firms range from independent financial advisers (IFAs) and boutique wealth managers to large asset management firms, private banks and financial technology (fintech) companies.

The sector is driven by rising global wealth, demographic shifts (e.g. ageing populations), regulatory changes and increasing client demand for personalised financial solutions.

The expansion of fintech, robo-advisers and digital banking is also transforming the industry, making financial services more accessible and efficient.

Current landscape

UK individuals currently have approximately £3.3trillion in liquid investable assets and the industry is predicted to grow at a CAGR of 7%. The amount of assets overseen by wealth managers grew by 17% between 2020 and 2023.

In 2024, M&A activity in the UK financial services sector rose significantly, marking a 26% year-on-year increase in deal volumes and reaching the highest annual level since 2012. UK wealth and asset management deals increased year-on-year from 107 to 122 in 2024, with the total publicly disclosed deal value rising substantially YOY from £2.1bn to £9.3bn.

UK firms acquired 97 overseas targets in 2024, an increase from 65 in 2023. Non-UK firms acquired 74 UK companies, up from 54 in 2023.

Regulations play a pivotal role in asset management. The Consumer Duty was introduced in June 2023 by the FCA (Financial Conduct Authority). This has put pressure on smaller firms, due to high compliance costs, to sell their businesses to larger ones, increasing M&A activity.

Market insight

• Assets under management (AUM) in the wealth management market are projected to reach $168.2trillion in 2025 worldwide. Financial advisory firms dominate with a projected market volume of $165.1trillion.
• AUM are expected to show an annual growth rate (CAGR 2025-2029) of 1.94%, resulting in a market volume of $181.6trillion by 2029.
• This sector can be split into Financial Advisory and Digital Investment. Advisory includes traditional services, whereas digital investment covers automated investment services and online trading services.
• Technology has been a catalyst for change in this market, with GenAI, ‘big data’ and blockchain propelling shifts in the methods by which services are offered and in the service offerings – e.g. robo-investors – themselves. Direct-to-consumer platforms for tech-savvy individuals have gained popularity. For example, Hargreaves Lansdown has expanded its offering to personal advice and digital wealth management. More established banks are following this market trend by launching their own apps/digital advice services to retain their customer base and not be left behind, e.g. Schroders Personal Wealth (Lloyds).
• Regulation highlights these shifts in the market, creating more stringent rules focusing on customer safety.
• Consolidations are reshaping the current landscape of the wealth management industry. Private equity and large firms have continued to acquire, e.g. BlackRock conducted a $12.5billion cash and share deal with Global Infrastructure Partners. Wendel Group made a strategic entrance in 2024 with its acquisition of IK Partners, further aligning with the broader trend of major firms diversifying their portfolios and bolstering their capabilities. Many international players are looking to gain a foothold in the UK market, as evidenced by RBC (Royal Bank of Canada) acquiring Brewin Dolphin for £1.6bn.

Key trends

Regulation: New regulations, e.g. The Consumer Duty, have increased governmental regulatory pressure, presenting challenges for wealth management firms. Complying with heightened regulatory expectations requires operational changes, making acquisitions/consolidations an attractive alternative. Moreover, smaller companies may not have the capital to fund the cost of building/upgrading current systems. M&A creates a way for them to access new technologies.

Consolidation: Larger asset and wealth management firms are expected to continue acquiring companies to achieve scale, diversify products and expand into other regions.

Expanding product and service offerings: Wealth management firms are seeking alternative products to broaden their service offerings, especially those which are customer centric, personalised, improve customer satisfaction and meet the expectations of the modern customer.

Key drivers and motivations for acquirers

Skill Seeking: In a recent survey which asked asset and wealth managers their motivation for pursuing an M&A strategy, the dominant response related to gaining access to skilled expertise at 73%.

Increasing Operational Efficiency: This was the second most popular reason for pursuing M&A. Investment firms Morgan Stanley and BlackRock acquired Parametric and Aperio respectively to bolster their separately managed accounts (SMA) capabilities. These allow for vertical extension of product and service lines.

Expanding Client Base and Geographic Reach: Acquisitions allow for market penetration at a much faster rate than organic growth.

EBITDA multiple ranges

In the UK and global financial services and wealth management sector, EBITDA multiples for company sales typically range from 6x to 18x, depending on the firm’s assets under management (AUM), fee structure, client base and level of recurring revenue. Key valuation trends include:

Wealth Management & Investment Advisory Firms: Businesses managing investments for high-net-worth individuals (HNWIs) and institutions typically trade at 10x-18x multiples, with premium valuations for firms with long-term discretionary mandates.

Independent Financial Advisers (IFAs): Smaller advisory firms tend to see 6x-12x multiples, with higher valuations for those with fee-based revenue models and strong client retention.

Private Banking and Family Offices: Firms catering to ultra-high-net-worth clients (UHNWIs) command 12x-18x multiples, reflecting the exclusivity and stability of their client relationships.

Asset & Fund Management Companies: Asset managers with significant AUM and strong investment performance can achieve 10x-16x multiples, depending on fund structure and investor composition.

Fintech & Digital Wealth Platforms: Companies leveraging robo-advisers, AI-driven financial planning and digital wealth solutions often achieve 12x-20x multiples due to high scalability and investor interest in financial technology.

Insurance & Financial Planning Firms: Companies specialising in life insurance, retirement planning and annuities typically see 7x-14x multiples, with recurring premiums and long-term contracts driving valuations.

Factors driving higher valuations and EBITDA multiples

Several factors influence valuations in this sector, with a strong emphasis on AUM, client retention and regulatory compliance:

1. Recurring revenue and fee structure

• Firms with fee-based models (e.g. percentage of AUM) rather than commission-based income are valued higher due to predictable revenue streams.
• Discretionary investment mandates, where clients entrust full control of portfolios, enhance valuation stability.

2. Assets under management (AUM) and client demographics

• Firms managing larger AUM with HNW and UHNW clients command premium valuations due to the stability of long-term wealth planning relationships.

3. Regulatory compliance and reputation

• Strong compliance frameworks and FCA accreditation in the UK, or equivalent regulatory approvals in other regions, enhance investor confidence and reduce acquisition risk.

4. Geographic reach and international client base

• Wealth managers and financial service providers with an international presence or global client base see higher multiples due to diversification and expansion opportunities.

5. Digital transformation and fintech integration

• Firms leveraging AI-driven analytics, automated portfolio management and digital onboarding attract premium valuations due to cost efficiency and scalability.
• Robo-advisory platforms and blockchain-based wealth solutions are particularly attractive to private equity and institutional investors.

6. Client loyalty and inter-generational wealth transfer

• Firms with high client retention rates and structured succession planning for generational wealth transfers are valued higher due to long-term revenue security.

7. Private equity and consolidation trends

• The sector is experiencing rapid consolidation, with private equity firms and larger financial institutions acquiring independent advisers and niche wealth managers to expand market share.
• Roll-up strategies (merging multiple IFAs into larger advisory firms) are common, driving up valuations.

Which factors drive growth in the UK wealth management industry?

Technology

• Three-quarters of asset and wealth management firms believe AI will be the most transformational technology over the next two to three years, with predictions of a 12% increase in revenue.
• GenAI, distributed ledger technology (DLT), ‘big data’ and cloud computing are some of the innovative tools expanding operational capabilities and transforming revenue models and business frameworks.
• Managers believe customers’ preferences will move towards personalised solutions as technology evolves. This can be attributed to the wealth transfer, estimated at $68trillion over the next decade, to the younger generation.  

Consolidations

• 81% of firms are contemplating strategic partnerships, consolidations or M&A to advance technological capabilities and build an ‘extended tech ecosystem’.
• 73% of asset managers considering M&A see it as a way to gain access to skilled expertise over the next two to three years.

Tokenisation

• Tokenised investment funds are expected to surge at a CAGR of 51% by 2028. Tokenised fractional ownership allows retail investors to buy small stakes in private markets and funds.

ESG

• New gen investors, e.g. millennial and Gen Z investors who are expected to inherit $68tn in the next 10 years, are interested in ethical investment. This creates opportunities for asset and wealth management to seek ESG-aligned investments.

Strategic interests of private equity and investment buyers

PE is a driving force in M&A in this sector, with 88% of UK deals in the first two months of 2025 having been either through direct investment in firms or via their portfolio companies.

Consolidation of the wealth management sector accounted for most of this activity. However, pensions consultancy and the administration market also acquired investments.

PE is a dominant player in the wealth management sector due to recurring, fee-based revenue streams where a firm’s fees are based on an AUM structure. This steady cashflow is attractive for acquirers.

Moreover, digital and technological capabilities draw in PE investment. Advanced technologies mean customers will be more inclined to choose a wealth management firm, driving top-line growth and retention.

PE firms are interested in investing into companies that have strong compliance frameworks.

What types of businesses are strategic acquirers pursuing in this sector?

• Boutique and regional wealth managers
• Specialised RIAs (US) /IFAs (UK) / Independent boutiques
• Technology-driven/WealthTech firms
  • E.g. JPMorganChase acquired digital wealth manager Nutmeg for £700m
• ESG-focused or Impact Investing specialists

Which companies has KBS sold in this sector?

Davidson Deem sold to Lumin

A Dorset-based company which provides mortgage brokerage services across the UK, Davidson Deem was sold to Lumin Wealth, a part of Swiss financial provider VZ Group and which manages client assets valued at over £1billion.

AVA Insure sold to A-Plan Holdings

London-based AVA Insure, which provides a comprehensive range of home, commercial, property and fleet insurance services, was sold to A-Plan Holdings, which integrated the company into the Aston Lark Group to enhance its growing insurance portfolio.

InEvexco sold to AssuredPartners

InEvexco, a market-leading, Kent-based insurance specialist for the events industry, was sold to AssuredPartners, the 11^th largest insurance broker in the US with revenues of over $1billion, which is now investing in UK and Irish firms as part of its international growth strategy.

Revell Ward sold to DJH Mitten Clarke

Huddersfield-based Revell Ward, which provides bespoke financial and business support services to companies and private clients, was sold to private equity-backed accountancy firm DJH Mitten Clarke.