Financial services sector ‘will consolidate further’

Competition from international firms will ensure that the Irish financial services sector consolidates even further, according to Brian Weber, head of the Irish operations for the international private client business, Quilter.

“Just over 10 years ago there were 16 Irish stockbroking firms. That is now down to six and two of those are owned by international firms.

“The pressure will be for more consolidation because international players bring much better economies of scale; better cost bases; greater research resources all spread over larger client bases,” Mr Weber said.

Over the past 18 months, NCB stockbrokers has been taken over by the South African firm Investec, and Dolmen has been taken over by Cantor Fitzgerald.

Quilter is celebrating its tenth anniversary in this country. When the firm set up, the Celtic Tiger was in full swing. That came to an abrupt end in 2008.

Mr Weber says that five-year period was “not a rational time for investment” because of an almost insatiable appetite for risk and leverage among Irish investors.

Over the past few years investors have become highly risk averse, preferring to keep their money on deposit. But now that interest rates have reached historic lows, there has been a flow out of deposits looking for higher yield.

The preference is for tactical bond funds, some global macro funds and long/short equity fund among others, he says. His preference in equities is blue chip multinational companies with export exposure to high-growth emerging markets.

Mr Weber, who was previously with Davy Stockbrokers before setting up the Quilter office in Dublin, says the mindset of the Irish investor has changed significantly over the past decade. “The Irish investor is much more sophisticated and is able to ask much more probing questions about performance fees and which part of the portfolio made returns etc.”

One very important development taking place in the Irish market is how fees are structured. Until now, fees have been charged on a commission basis, but that is about to change. In future, there will be a move towards an “all-encompassing fee” in line with international best practice.

This is a much better model for the client, says Mr Weber.

“There will be a greater duty of care towards the client. There will be a much greater willingness to ensure that product is suitable for a client not just at the time of investment, but over the lifetime of the product,” he said.