As signs of a forthcoming global recession increase, wealth management is likely to get more complicated, driving up demand for services in the sector. PE Hub expects to see more private equity-backed deals in wealth management. To that end, earlier in June, Lovell Minnick Partners, a Philadelphia-headquartered private equity firm investing in financial services, fintech and business services, agreed to buy a majority stake in wealth and asset manager London & Capital. The transaction is expected to close in the fourth quarter.
PE Hub spoke with Spencer Hoffman, partner at LMP, and Guy McGlashan, CEO of London & Capital, to get both firms’ perspectives on the deal.
“We think it’s always a good time to invest in financial services, since it drives the global economy,” Hoffman said. “It has long-term, secular tailwinds that we think are a great investment opportunity for firms like us.”
The investment in London & Capital “comes at a very, very good time, because arguably, it’s been a decade since clients have needed significant support and help in their wealth planning and their financial planning.”
Established in 1986, London & Capital is a wealth and asset manager that works with both private and institutional clients. Many of the firm’s private clients have very particular needs, as most have financial and business interests, property and family across multiple countries. These unique needs are one of the reasons LMP was drawn to London & Capital. LMP partner Spencer Hoffman says clients like these aren’t well served by the vast majority of wealth managers in the UK.
“We see the demands created by changing regulations, Brexit, and transatlantic tax challenges,” Hoffman said.
Hoffman describes London & Capital’s team as highly motivated and well positioned to take on the opportunity created by the “great intersection of market tailwinds and secularly driven demand.”
LMP made the investment from the firm’s fifth fund, which has backed companies in the wealth management, insurance, fintech and payment spaces. From a portfolio construction perspective, Hoffman sees London & Capital being complementary to the other investments, and he expects positive collaboration across the portfolio.
Moving forward, the strategy for London & Capital revolves around supporting the company’s organic growth. This includes investments in client-facing sales and marketing activities, and significant expansion in the UK but also in the EU, where many of the firm’s clients are looking for more “holistic solutions” for their wealth management needs.
As a firm that has invested in the financial services industry for more than 20 years, LMP has seen the ebbs and flows of exit opportunities for companies like London & Capital. More recently, LMP has seen next-generation PE firms “looking to continue the success that we start with our portfolio companies, keeping these companies independent,” Hoffman said.
“We’re also seeing significant opportunities for management teams to self-perpetuate, through effectively buying down their private equity supporters in a transaction over time.”
From London & Capital’s perspective, the firm was struck by how well the two firms’ values lined up. London & Capital CEO Guy McGlashan explained that while both firms strive to offer excellence in a client-centered manner, the teams maintain a “family feel around the place.”
In addition to the obvious components of the deal, such as the new capital, McGlashan considers LMP’s expertise in the boardroom to be invaluable.
“LMP brings in functional expertise, whether that’s marketing, M&A, products or technology,” he said. “Having a little more firepower means that we’ll be able to go out and hopefully grow a little more quickly than we’d be able to do on our own.”
McGlashan echoes Hoffman’s thoughts regarding the changed needs of wealth management clients. He has noted a strong shift towards a more discretionary investment management, where it’s left in “the hands of the experts.” Alongside this shift, McGlashan has also seen a trend toward financial planning and advice. “It’s about getting those big decisions made right early on and understanding what your objectives are, based on how you’re expecting life to play out for your family.”
As for many other sectors, the integration of technology is also prevalent in wealth management. With backing from LMP, McGlashan sees opportunities for technological development for London & Capital, especially in the areas of additional information on portfolios, cash flow planning and modeling. Technology, McGlashan said, “sits as a complementary element of service delivery, as opposed to a solution in and of itself.”