Growing numbers of start-up advice firms are joining independent network Sense, according to Phillip Bray, as they branch out on their own in reaction to takeovers by restricted businesses.
The network’s head of marketing said more than 80 per cent of new joiners have fallen into this category.
One of the reasons he gave for this was the increased number of advice firms becoming restricted, prompting some of their employees to strike out on their own as independent advisers.
He said: “More than 80 per cent of new joiners to us are new start-up IFA practices, but they are not new advisers and they clearly have a history in the industry. There is definitely a trend towards new start-up IFA practices.
“It may be as a result of consolidation,” said Mr Bray. “If you are working for a firm which is consolidated into another one, the service you are offering changes and it is not to your liking, then you will vote with your feet.
“Consolidation within the advice sector does seem to promote more restricted models.”
Last year London-based M&A adviser Imas said consolidation of adviser firms would continue for some time at the lower end, affecting firms valued at £5m, because it is such a fragmented market.
One example of the consolidation trend this year has been Standard Life’s resticted advice arm 1825, which in the space of one month has bought Norwich-based IFA Almary Green, central Scotland-based Munro Partnership and London-based IFA Baigrie Davies. All the firms will be absorbed into 1825’s restricted model.
Meanwhile, Tilney Bestinvest recently bought Towry in a £600m deal.
The FCA was unable to immediately provide figures on how many new advice firms had been established in the last three years since the introduction of the Retail Distribuition Review, which increased the regulation around offering independent advice, leading some firms to drop the status and become restricted.