One of the themes discussed at NextWealthLive last week was the need for scale in parts of wealth management and the challenge to scale in others. There is a barbell effect emerging across the industry – a few big players and several boutiques in asset management, portfolio management and custody. As Martin Gilbert quipped at NextWealth Live, where you don’t want to be is in the middle (I’m paraphrasing until we get the event videos back!).

Cost and efficiency will be a big driver for scale players. Boutiques can differentiate and be nimble. As Martin said, the challenge is the middle ground. I can’t help but reflect on today’s acquisition of Brewin Dolphin by RBC as an example of a mid size firm being swallowed up in a drive to scale. Brewin Dolphin is of course a big business but not on the scale of US giants Vanguard and Blackrock or UK firms such as LGIM, Aviva or Schroders. Schroders market cap is 5 times that of Brewin Dolphin. Aviva is 11 times.

While scale arguably brings benefits to asset management, portfolio management and custody, can you scale financial advice? Tech can play a role in driving efficiency, but does it bring scale? Financial advice is at its heart a relationship business and those relationships rely on human interactions. There have been some good efforts to scale advice but they have mostly focussed on product advice rather than planning. I am thinking of Wealthfront in the US or Nutmeg in the UK. Large vertically integrated players earn profits on product and often lose money on advice.

But financial planning is about so much more than product advice. It is about a sense of financial security – answering questions such as “am I going to be okay?” and “can I afford to retire early?”

Readers of this blog will know I am passionate about the role technology can play in delivering better and faster financial advice. It’s important though to remember that technology isn’t always about scale.