Mergers and acquisitions market emphasizing vertical integration predicted to have widespread impact

A recent report by NextWealth has shed light on the M&A market focus on vertical integration, predicting that it will have a significant ripple effect on the financial advisory industry. The report found that acquirers are prioritizing the enhancement of investment propositions, which will lead to broader implications across the sector.

The consolidators and aggregators report by NextWealth delves into the impact of mergers and acquisitions on the advice market. Profiles of 25 acquirers who made substantial purchases over the past four years were included in this year’s report. The analysis focused on firms’ internal capabilities across various functions, including platforms, fund management, portfolio management, technology, and professional services.

A staggering 84% of firms were discovered to have in-house model portfolio services, with 68% having an in-house range of funds. Many firms emphasized their commitment to upgrading their centralised investment proposition (CIP) and expressed openness to collaborating with investment partners to develop in-house fund and portfolio ranges.

Heather Hopkins, managing director at NextWealth, noted that acquirers are increasingly moving towards vertical integration to simplify operations and enhance profit margins. By refining their investment propositions, acquirers aim to make them more competitive and appealing to acquired advisors and their clients. Hopkins also highlighted that these steps towards vertical integration will prompt platforms, asset managers, and DFMs to adapt their practices when working with such firms.

The report’s analysis was based on deals between Q1 2021 and Q1 2025. Despite a slight decrease in the pace of acquisitions in 2024 compared to the previous year, the total value of deals surged due to the acquisition of firms with over £1bn in assets under administration. The cost of acquiring firms has doubled since 2021, a trend expected to continue, with the value of deals projected to rise.

Private equity firms are heavily invested in the financial sector, and their interest in financial services is anticipated to persist. Over the coming year, a slowdown in the number of deals is expected, but their value is foreseen to increase. As more private equity firms seek to exit positions, the report predicts the rise of consolidation among consolidators, shaping the UK wealth market.

Last year’s report underlined a shift in acquirers’ focus towards consolidation rather than aggregation in response to rising operating costs, regulatory pressures, ongoing advice charges, and increasing borrowing costs. The trajectory of the M&A market indicates a transformative period for the financial advisory landscape, with significant implications for both acquirers and the broader industry.