NatWest eyes digital wealth acquisitions amid sector slowdown

NatWest could follow JP Morgan Chase and snap up a UK digital wealth fintech amid a slowdown in the sector, which might make acquisitions more attractive to the big financial institutions.

Speaking at a finance conference in Rome last week, Alison Rose, NatWest CEO, said the bank was looking at purchases in the wealth sector.

Rose said: “I think there are opportunities to look at acquisitions in that space if they are compelling.”

Rose said the bank, which is due to launch a buy now, pay later product later this summer, could expand the retail business, particularly in the credit card market, as well as the wealth division through acquisitions. 

Should NatWest pursue an acquisition in the wealth sector, it could follow JP Morgan Chase which last year snapped up UK robo wealth manager Nutmeg for nearly £700m, as it plotted its assault on the UK market.

NatWest has shown an appetite for standalone fintech brands being part of its broader business.

It currently has a business fintech Mettle as part of its stable and until last year, when it was shuttered, had alternative lending brand Esme Loans.

Rose’s comment comes amid the retail investment and wealth sector suffering from a marked slowdown recently as investors are put off by turbulent markets, rising inflation and economic uncertainty. 

This contrasts with the sector enjoying a boom time during Covid, as a wave of new retail investors with time on their hands signed up to the platforms.

The WealthTech downturn

The economic downturn is hitting the digital wealth and investment firms, with falling fees and smaller margins.

Last week, AltFi revealed that challenger stockbroker Freetrade was making job cuts, which could impact up to 15 per cent of its staff.

Freetrade’s CEO Adam Dodds announced the news as part of a company-wide action to reduce costs and extend the fintech’s runway.

“Global stock markets have been falling and funding for businesses like ours has slowed. It’s essential that we focus now, more than ever, on building a sustainable business on a strong financial footing,” Dodds said.

“By taking this difficult step now, we will ensure we can preserve our cash for as long as possible.”

It is not alone and the downturn is impacting players throughout the sector.

Lloyds, the UK’s biggest bank, told Reuters that its investment platforms slowed in the first quarter of 2022, compared to 2021 while AJ Bell and Hargreaves Lansdown are struggling with a slowdown in customer numbers.

And according to an analysis by Reuters around seven of the 13 smaller investment platforms posted losses in their most recently filed annual accounts.

"I can see a few of the smaller platforms either coming together or maybe a major player acquiring them,"  Oliwia Berdak, financial services research director at Forrester, told Reuters.

"We had an influx of new investors in the pandemic. The question is, will those people now flee?"

Yet, it’s now all bad news for the sector.

In April Moneybox, for example, announced it had raised £35m from asset management giant Fidelity in a Series D funding round that will enable it to scale up its operations and launch crypto investments.

And in January this year, Moneyfarm agreed a fresh funding round of £44.1m, led by a leading investment house that has acquired a minority stake in Moneyfarm.