IFAs ready for consolidation push

Consolidation would add strength to the sector, industry professionals have claimed as they welcome the news that Towergate Financial has raised £108m to establish a national IFA brand.

Funding for the deal has largely been raised from Lloyds TSB and RBS and the announcement has been hailed as a boost for the industry.

Patrick Snowball, chairman of Towergate Financial, said: “We want to consolidate the IFA market, building a national IFA in the process. We have already acquired five companies with 44 RIs and we are in discussions with several other firms, although those discussions remain at different stages.

“This will be an adviser-led model and will focus on buying up a large regional IFA with roughly £1m earnings before interest, taxes, depreciation and amortisation (Ebitda) and use this as a launchpad to purchase other advisory firms of roughly £250,000 profits.”

Mr Snowball said the main focus would remain on consolidation, although he did not rule out the white labelling of products in the future.

He added: “This always remains an option, although this would be something we would look at only after everything else has been established.”

Chris Cummings, director general for Aifa, welcomed the news. However, he added that there would always be a place in the market for smaller IFA firms.

He said: “This is good news and shows there is value in IFA firms. The market is going through a period of consolidation that will lead to bigger and financially more robust firms.

“However, there will always be a valuable place for smaller advisers in the sector and they still have an important role to play.”

David Middleton, head of strategic marketing for Towry Law, said this was a sign of the times. Although he questioned the role of smaller IFAs in the current market. He said: “We think consolidation will continue in the IFA sector and Towry Law has acquired several firms this year on this basis.

“I can confirm we are currently in ongoing discussions with a number of companies as to further acquisitions although I could not go into details as yet as we remain in negotiations.

“Due to the nature of the market, the industry has been typified by smaller firms up to this point and I would wonder how they can stand up in an increasingly complex financial advice space.”