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Investors see value in buying IFAs

Investors see value in buying IFAs

Succession’s cash injection from HSBC and Tenet’s decision to snap up retiring advice firms is a sign of current appetite to build larger intermediary firms, according to industry experts.

Last week Succession secured £25m from HSBC to buy advice firms and Tenet announced plans to use more than £20m it has stashed away to buy retiring firms.

Steve Harris, chief executive of private equity firm Committed Capital, which invested in IFA acquisitor Fairstone, said changes such as the Retail Distribution Review and pension freedoms have made life difficult for small firms.

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As a result, he said investors are seeing opportunities to obtain decent returns on their cash by buying small firms and building larger intermediary businesses.

He said: “Overall, there were some 14,500 IFA firms regulated by the FCA in the UK market in 2015.

“We saw private equity backed investment into at least 30 IFAs in 2015. Much of the investment in the industry goes to support consolidation by acquisition, often together with investment into technology and regulatory compliance.”

Mike O’Brien, managing director of TenetConnect and TenetSelect, said a programme of buying up the businesses of its retiring advisers for its wholly-owned appointed representative Aspire Financial Management would be paid for by £22m put into the business by Tenet’s owners.

The launch of the buyout scheme follows hot on the heels of Tenet’s purchase of Furness Building Society’s financial advice arm for Aspire Financial Management.

Sesame Bankhall Group managing director Stephen Gazard said his company also puts its retiring members in touch with potential buyers and supports them through the deal.

He said most sales have gone to consolidators in recent years.

Keith Richards, chief executive of the Personal Finance Society, said the main consolidators are currently manufacturers and so are well funded to acquire and increase growth at pace.

He pointed to Standard Life and Old Mutual Wealth as upping the consolidation stakes.