Private equity interest in the UK wealth management space is far from waning despite higher interest rates, and there is some good to come out of that, says Lawrence Cook.
The industry veteran, who started his first job as a sales manager at Standard Life as far back as 1984, says private equity has a distinctive way of operating, which, when done well, forces managers to stay at the top of their game.
Cook has plenty of experience with private investors, having been a board director at Thesis Asset Management when private equity was brought in.
The business was sold to Sanlam in 2019, which itself was acquired by Oaktree Capital Management and renamed Atomos in 2022.
“Having worked now in three firms where there’s been private equity backing, I’m very familiar with that world,” he says.
Cook says he believes private equity interest in wealth management will carry on for some time.
Likening the market to a lava lamp, a metaphor he says he borrowed from his friend Timebank founder Damian Davies, he says: “At first glance, when you look at a lava lamp…[it] all looks a bit random and chaotic, but there is a pattern going on.
“And that’s how capital is being recycled within the wealth management market. So I suspect it will carry on for some time in one form or another.”
If you look at the strength of the dollar, the difference and disparity in the price the consumers pay for a broadly similar [advice] service, that’s still very attractive.The idea is, he explains, something small starts at the bottom and gets bigger with private equity backing, and over time it rises to the top.
Then at some point there is a sale or people within the organisation leave and fall to the bottom to form their own business and so it starts again.
He adds: “And what it leads to, I think, is a real focus in management on delivering more effective, streamlined, efficient services.
“So ultimately, it’s probably a good thing for the wealth management business, because it really puts management’s toes to the fire; you need to keep focused on delivering.”
Looking to the near future Cook says he “can’t see the interest waning too much”.
This is despite the current proportionately high interest rates, which could have a negative impact on a private equity investor’s debt financing strategy.
While Cook acknowledges this conundrum, he says overseas investors would still find there are large margins to be had in the UK wealth management market.
“If you look at the strength of the dollar, the difference and disparity in the price the consumers pay for a broadly similar [advice] service, I think, particularly private equity money across the pond are looking at that saying well, that’s still very attractive.”