Citing the mortgage market as an example, Mr Stockton said he had no concern about lack of customer choice, even though an average of nine out of 10 mortgage transactions are carried out by the top 11 firms.
He said: “There are enough firms in the market, if you want a small or large firm. Nobody ever complains about customer choice in the mortgage market.”
Mr Stockton was speaking to Financial Adviser on the phone from a busy street in Reading about market trends and the future plans for his newly combined Bellpenny and Ascot Lloyd business.
The merger, which took place on July 3, has seen the firm grow to a 100-man adviser business, looking after more than £40,000 fee-paying clients, with £6bn of funds under management. According to Mr Stockton, the company is close to acquiring more companies, as owner global alternative investment management firm Oaktree Capital Management’s appetite shows no sign of abating.
Looking at opportunities
Mr Stockton said: “We are already looking at one or two interesting opportunities and deciding if they are for us. We will do more acquisitions. This is not the end of our growth ambitions.
“The key is to make sure the funds under management grow and that things are in a good place. We want to make sure the advisers we have all have the tools they need to be able to serve their clients in the best way possible. We have some revenue numbers we need to achieve and profit numbers we need to move forward with.”
Following the deal, Bellpenny finance boss Matthew Moore is chief financial officer of the combined entity, while Mr Stockton is chief executive.
Mr Stockton described the deal as a merger not a takeover and that both businesses have weapons in their armoury they can use to learn from each other. It will enable the company to take advantage of growth opportunities, while retaining the three brands: Bellpenny, Ascot Lloyd and BIA Financial Planning.
Richard Dunbabin and Pat O’Hara of Ascot Lloyd remain as founders and will assist the executive director leadership team.
Mr Stockton said key to the merger was ensuring that advisers and customers have not noticed anything different about the operations or the way service is provided. He does not plan to make any “rush decisions” about the business structure, but will explore ways the combined entities can enhance how they work together.
The company has the scale to absorb smaller companies, but Bellpenny plans to continue on the path it has been on for the past 18 months, which is to carry out fewer larger acquisitions.
Although the company has indicated a move away from acquiring smaller businesses, this does not mean consolidation at that end of the market is going to slow, Mr Stockton said.
The industry is still feeling tremors from the retail distribution review (RDR) of 2013. Mr Stockton said consolidation is set to continue, primarily driven by the regulatory burden and technological demands.
He said: “RDR was the catalyst. We now have the rising costs of professional indemnity (PI) cover. The fact that no new entrants can get PI cover makes it difficult for entrants to come in and take the place of old.
“There are a lot of firms where the main principal is over 50 years old and people are evaluating their options. The rising cost of the FSCS scheme and the rising cost of FCA fees and complexities of regulation is affecting smaller firms.
“Some medium sized firms are also saying this is getting expensive. In my opinion, there will be more consolidation in the market.”
Challenging for small firms
Alongside RDR, other factors are putting pressure on companies to sell up, as it becomes increasingly challenging to operate a smaller firm. Customer demand is becoming more sophisticated. This is set to lead to a reduction in firms in the market, as smaller models struggle to invest to keep up with changing trends. But Mr Stockton is confident Bellpenny/Ascot model is able to meet those requirements and withstand the wave of technological change that is coming.
It has scale and the capital to invest in those technological developments.
Mr Stockton said: “Clients will demand mobile applications. They will expect to get valuations on the phone in the same way they get their bank balance. You have to have scale and spend money in developing and investing in the thing that clients really value.”
For Bellpenny, the business uses intelligent office technology to do same-day valuations, while its sister company Ascot Lloyd has its own mobile applications.
The need to invest in systems as a result of increased awareness of data protection and cyber protection is another big factor that will push many firms to sell their business.
Despite changes in the market, Mr Stockton believes smaller firms can thrive if they evolve.
He added: “Distribution firms are either going to partner with their product providers, which is one solution, or they will have to invest themselves. It’s not impossible to be a two to five-man firm. It is just getting increasingly difficult.”
Ima Jackson-obot is features writer of Financial Adviser
Nigel Stockton's career highlights
1984-7 York University
1987-99 NatWest Bank, various retail banking roles
1999-2000 TheStreet.co.uk, business development director for the online daily news site
2000-2003 Financial Times, circulation director for the newspaper and content distribution for FT.com
2003-2010 Lloyds Banking Group and HBOS, leading the mortgage intermediary business across both Groups was also MD of Birmingham Midshires
2010-2015 Countrywide, led the financial services business of 1100 mortgage brokers, including buying the Mortgage Intelligence network. Part of the Executive team for Countrywide's IPO in 2013.
Sept 2015 - Appointed Bellpenny CEO.
January 2017 - Formation of BIA Financial Planning as the new independent advice arm of Bellpenny Group.
July 2017 - Appointed Ascot Lloyd Bellpenny CEO, following merger of Bellpenny and Ascot Lloyd.
