Recent acquisitions imply, firms who historically operated in parts of the value chain are expanding across traditional industry lines to build integrated businesses.
In a regulatory, macroeconomic and technological environment that is changing the dynamics of how the industry interacts with its customers, EY teams have set out to investigate whether these acquisitions are isolated cases, or part of a bigger shift within the UK retirement industry.
To understand how firms are responding, EY teams reviewed the M&A activity of 1,100 UK financial services organisations from the start of 2010 until the end of 2018. The analysis concluded that firms are strategically altering or expanding their business by removing themselves from non-core business and placing strategic focus on new propositions that span a wider range of customer needs. L&P firms, asset managers, wealth managers and advisors are converging and diversifying their propositions to get closer to the customer and support them with both long- and short-term solutions.
The M&A analysis shows that over the past decade there has been a much greater diversity of transactions across all sectors, as well as consolidation.
Getting closer to the customer is key and that means assessing the consequence of offering an advice component and serving their entire balance sheet as opposed to not altering your business. Firms that have sought to expand and provide an advice element are seeking to capture much more of the value chain. If these models continue to grow, traditional firms will need to choose between being wholesales to those who control the customer or securing access to customers themselves.
The future of L&P firms lies in bringing together a variety of products to meet customer needs through processes that will be enabled by technology.