The Garrulous Jay – What Goes Around…

Last week NatWest announced that it had acquired Evelyn Partners for £2.7 billion. As NatWest’s press release would have it, this “creates the UK’s leading Private Banking and Wealth Management business”.

Paul Thwaite, CEO of NatWest Group, proclaimed that, “Bringing together these two leading businesses creates a unique opportunity to provide financial planning, savings and investment services to more families and people across the UK”.

With the bank’s ownership of Coutts now coupling up with the newly introduced Evelyn Partners, this certainly looks like a pretty formidable proposition.

And yet I can’t help thinking that we’ve been here before, and that the timing is also interesting.

In 2000 Halifax bought a 60% stake in another wealth management company, to combine with its leading position in the mortgage market and its IFA-focused life insurer, Clerical Medical.

13 years later, after being absorbed first into HBOS, and later by Lloyds Banking Group in the wake of the financial crisis, the bank sold its remaining shares in St. James’s Place.

There is certainly some logic to the acquisition as demographics, the complexity of the financial markets and the UK’s labyrinthine tax system drive increasing demand for financial advice.

At the same time, costs are leading to an increasing need for scale in the market as companies seek to keep up with the accelerating pace of technological change.

I have written recently about the transformational power of AI in the financial planning industry, and this also applies across financial services more widely. But this will come at a price. Companies that have the financial firepower to keep up will thrive, whereas those that don’t may struggle to survive.

Being able to deploy this technology across a wide customer base, many of whom may not currently have a financial adviser, represents an opportunity that potentially justifies the acquisition.

Set against this, though, are the upfront expense and the age-old issue of what might be called ‘fit’.

If harnessing AI is the route to broadening and deepening a bank’s relationships with its clients, might NatWest not be better advised to deploy £2.7 billion into the technology directly rather than buying a more ‘traditional’ wealth management platform?

Equally, not for the first time, the strategic logic is predicated on the assumption that banking and wealth management are natural bedfellows. Here I have some misgivings on both sides of the client/adviser relationship.

Banks have spent years closing branches, automating their services and becoming increasingly ‘remote’, in both senses of the word.

Financial planners continue to place face-to-face contact at the heat of their proposition, even if it’s across a screen.

This means that clients’ expectations of these two parts of the industry are quite different, as are the skills required to succeed in them.

Perhaps this too changes with the growing presence of AI across financial services. In some ways nothing has changed, in others things are completely different.