Consolidation of smaller IFAs set to continue

According to the London-based M&A adviser, the IFA sector is one of the few financial services in which consolidation was still taking place and was set to continue.

Mr Hansson, investment partner at Imas Corporate Finance, said: “There will be continued consolidation at the lower end of the scale as it is such a fragmented market and there are masses more for them, firms such as Bellpenny and Succession, to consolidate.”

The other dynamic is that there will be more buyers for restricted advice firms than those offering independent advice. This was because the whole-of-market sector had more stringent processes, he said, compared with the restricted sector.

According to Mr Hansson, the middle market will not be as active, as advisers will remain independent with many finding it hard to accelerate growth.

“If fully compliant, this market can grow and live on its own but they are finding it difficult to grow the business so there will be need for partners to sell,” he said.

However this is a slower consolidation, he said, and there will be a flow of those deals but not at the same rate.

There has been activity at the higher end of the market with Towry, Standard Life and Close Brothers coming into the market. Sanlam recently bought 19.9 per cent into Caerus, and took full control of the portfolio management.

Mr Hansson said the higher end was an interesting market, adding: “Here we might see major brands evolving, firms such as Towry and it remains to be seen what Tilney Bestinvest will do, it could be a key brand if it adds an advisory proposition.”

According to Imas data, the UK market has 183 IFA businesses worth £5m or more, below that are 5,600 businesses worth less than £5m, subsidiaries in larger groups add another 1,000.

Data published by the M&A experts last month revealed that over the past five quarters there had been around 45 deals in each quarter.

In May, national advisory firm Chase Templeton, which provides private medical and protection insurance brokerage services, bought Get Private and Medical Insurance Advisers.

Background

Mr Hansson’s remarks that adviser firms will continue to consolidate came in the wake of the acquisition by wealth manager Bellpenny of Surrey-based firm TJ Financial Services, bringing in £34m FUM, and Devon-based TOR Financial Advisers, bringing in £22m FUM.

Bellpenny’s chief executive Kevin Ronaldson said: “Post-acquisition we continue to invest heavily in our people, in new technology and in the necessary local infrastructure to ensure we are able to deliver to the highest of client expectations.”

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