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Q2 All Market Overview CARG

Mark Robinson, Companies Editor – Investors Chronicle
03 June 2019

This quarter’s review of the stockbroking/Financial Advisers space is noteworthy for the impact of Shore Capital Stockbrokers’ £8.9m deal to acquire its industry rival Stockdale Securities. It’s one of the latest manifestations of the rush to consolidation within this corner of the advisory complex.

In addition to existing financial pressures, advisers have had to contend with increased regulatory strictures, specifically the introduction of European Mifid II rules, which are designed to bring more transparency to markets and more protection for consumers.  The new framework has forced asset managers to set up new protocols for reporting trades and to pay separately for research, severely impacting related revenues. The industry has also faced a squeeze on revenues due to a fall-away in initial public offerings and further pressure on revenue through a move to automated trading processes.

It isn’t yet possible to gauge the shape and scale of the industry that will emerge once these factors play-out, though it seems certain that players in the sector will need to operate from a lower fixed cost base – economies of scale will be brought to bear. Mergers can effectively reduce unit costs linked to areas such as information technology, whilst expanding geographic reach and the variety of potential revenue streams.

The impact of the Stockdale deal on numbers is reflected in our AIM stockbroking rankings, with the integration of Stockdale precipitating a dramatic shift up the AIM table for Shore Capital Stockbrokers, with the combined business moving up from 12th to third place. J.P.Morgan Cazenove reversed the result of the previous quarter, as it has supplanted Bank of America Merrill Lynch at the head of the FTSE 100 rankings. Barclays now shares third place in the FTSE 250 rankings with Jefferies Hoare Govett, partly because of falling index numbers for UBS. Morgan Stanley & Co is into third place by representative market-cap in the overall rankings, with UBS heading the way on that basis, while Numis Securities takes the laurels by total client numbers. Numis Securities and Peel Hunt are up into a share of third place in the Basic Materials sector, while Numis Securities moved up to second place, alongside Peel Hunt, in the Health Care sector.

As with the stockbroker rankings, the most noticeable move for the quarter in the financial adviser rankings came courtesy of Shore Capital & Corporate’s integration of Stockdale Securities clients. This moved the adviser up 12 places into seventh place in our AIM rankings, though it is still someway short of finnCap’s total at the head of the tableNumis Securities is up into third place in the FTSE 250 on the back of a handful of gains, while Lazard & Co followed suit by the collective market value of its client roster. HSBC Bank debuted within our FTSE 100 top-tier rankings during the quarter, with UBS holding a marked advantage by client numbers and their collective value and Morgan Stanley & Co slipping down to the bronze medal position. In the sector rankings, Beaumont Cornish is up into joint second place in the Basic Materials sector. The rankings are still dominated by SP Angel, which added Rambler Metals and Mining and Orosur Mining Inc. The most prominent additions to Shore Capital & Corporate’s client roster were apparent in the Financials rankings. The adviser now sits in eighth place, having debuted on the back of multiple constituents. There is now a three-way tie for the lead in the Health Care rankings, as Peel Hunt has drawn level with finnCap and Panmure Gordon, while Cenkos Securities has taken a share of third place with SP Angel in the Oil & Gas sector.

Within the audit space, Grant Thornton replaced KPMG in second place in our AIM rankings after it added a net four new constituents through the quarter, including Xeros Technology and Murgitroyd Group. EY is up into second place in the Small-Cap/Fledgling rankings on the back of new mandates, while the ‘Big Four’ maintained their dominance in the FTSE 100 rankings. Crowe UK added more clients than any other auditor this quarter, and the gains were concentrated in the Financials sector, through constituents like MENA Land, Aquila Services and Blencowe Resources. The auditor has edged up into a share of eighth place alongside RSM.

Fieldfisher is up into third place in the AIM law firm rankings, following its appointment by Infrastrata. Pinsent Masons remains out in front of the field, ahead of Gowling WLG, though DLA Piper remains the frontrunner by representative market-cap. Stephenson Harwood moved alongside Carey Olsen in third place within the Small-Cap/Fledgling category, albeit as the result of attrition. Linklaters has taken a share of second place in the FTSE 100 by constituent numbers, 26 apiece with Allen & Overy, and it still leads the way by aggregate client market-cap. Herbert Smith Freehills has taken a share of the overall lead with Slaughter and May on the back of a net brace, though Linklaters enjoys a sizable advantage by collective market-cap. Pinsent Masons has replaced Freshfields Bruckhaus Deringer in second place in the Consumer Services sector after its appointment by Huntsworth. Pinsent Masons has taken top billing in the Technology sector via a net brace, while Taylor Wessing has secured outright second place in the rankings.

Financial PR firms have also been subject to increased consolidation. Buchanan, through the addition of Regional REIT, has moved ahead of Lansons into second place in the Small-Cap/Fledgling rankings, while narrowing the lead of FTI Consulting. It has also moved onto the podium places by virtue of the representative market value of its clients. Two new constituent mandates, including one delivered from Syncona Ltd, enabled FTI Consulting to regain the outright lead in the FTSE 250 rankings after relinquishing it in the previous quarter. Brunswick has extended its lead at the head of the FTSE 100 rankings after it was brought in to provide consultancy services for Smith & Nephew. Finsbury is up into second place on a standalone basis. St Brides Partners has regained the outright lead in the Basic Materials sector, with Blytheweigh slipping down to second place. Tavistock Communications is into third place in the Oil & Gas rankings thanks to its appointment by President Energy. Vigo Communications moved closer to sector frontrunner Camarco after it was handed PR duties for Independent Oil & Gas.