'We are only focused on the top 10-15% of advice firms'

As a subsidiary of the FTSE 100 giant Schroders, and with a wealth division run by Ed Dymott, a veteran of Aegon, Fidelity and a host of industry committees, Benchmark can hardly be said to be an insurgent. 

The firm has assets under administration of £17bn on the platform and “roughly the same again” via the other channels. 

Dymott presides over an operation that employs some advisers and acquires advice businesses, provides investment management to other advisers, and has a platform and regulatory permissions offering to others.

We don’t really care about the business model as long as they are a quality firm.

Advisers are free to choose from any combination of the above. 

In all, 1,700 or so advisers have a relationship with Benchmark, with 70 of those employed by the company. The business that employs advisers directly was called Aspect8, before rebranding to Benchmark Financial Planning earlier this year.

But such a menu of options may cause advisers considering working with the firm to ponder: is there a grand plan behind it all?

What's the big idea? 

Dymott says: “Our aim is to be a turnkey solution for financial planners. It doesn’t matter to us if it is an exit, or a start-up or a firm looking to grow, we want to work with them all. Whether they want tech, or regulation, or investment management, that’s all fine. And we don’t really care about the business model as long as they are a quality firm.”

Benchmark acquired one advice firm and took a stake in another in November, and Dymott says both of those deals followed the pattern he deploys when investing in advice firms, as both firms have owners looking to retire. 

We think we can increase productivity for advisers.

He says the firms they acquire are typically part of a pipeline of firms “where the owner doesn’t want to retire now, but maybe wants to have a plan for when they retire in three to five years, and a plan where they know the staff and the clients are looked after.

"That’s probably our USP, and differs from maybe the more typical consolidator model. Consolidators are probably more short term in their thinking, their aim is to sell it on in a few years. ” 

Dymott joined the firm in February 2021, and says the other focus of his acquisition strategy has been to “broaden our geographical reach – we weren’t well enough represented in the Midlands, and have tried to address that with some of the deals we have done this year.”

The other aspect he says unites the disparate business units is something that has been a bit of a holy grail for market participants for many years, achieving economies of scale, and not merely growing for the sake of it.

Dymott acknowledges that this is at the heart of his firm’s strategy, but says it is not a new concept in financial services.

“When I joined this industry, it was at Fidelity. I was one of the people involved in launching the Fundsnetwork platform there. And the USP we had for that platform was that a client valuation, which at that time could take eight hours, and do it in eight minutes.

"And right now, with our platform at Benchmark, we think we can increase productivity for advisers by reducing the amount of time it takes them to do a client meeting by an hour per client.

"So if a firm has 500 clients, that is 500 hours per year saved. And I think an issue that will emerge for some of the firms that have entered the advice market as consolidators is that they are not able to generate the economies of scale they expected, and that becomes an issue for them in years to come.”

Vertically challenged? 

Dymott says that is a trend that is already driving advisers towards Benchmark. 

He says: “We already have advisers coming to us from businesses that have been bought by consolidators. Those advisers are not seeing the benefits of the economies of scale, and are not happy.

"Some of them have come to us, they want to set up their own practice, but are happy to be an authorised representative using our platform and regulatory permissions.”

The pipeline we have right now for future acquisitions is the strongest it has ever been.

He says Benchmark has no wish to “dilute financial advice firms; we are only interested in the top 10-15 per cent of firms, and the pipeline we have right now for future acquisitions is the strongest it has ever been.” 

At present, there are 111 advice firms operating as authorised representatives of Benchmark Capital. 

Benchmark is owned by Schroders, an asset manager, and the company has a subsidiary called Schroders Investment Solutions, which provides model portfolios.

Vertical integration is another feature of the industry in recent years, as businesses seek to own all the different product areas a client needs, and collect multiple fees. 

Dymott bristles a little at the idea that this approach is central to the Benchmark business model. 

He says that while “there is a high adoption” level of the Schroders model portfolios among clients of the Benchmark platform, “they do not have to do this, and the portfolios are also available on other platforms”.

He declined to comment on what proportion of the assets under administration of Benchmark are also deployed into the discretionary fund business owned by Schroders.

When I started out, platforms were another product, but now they are seen as part of the supply chain in the advice process.

But in 2018, FTAdviser reported that around half of the net inflows into Schroders' wealth management business came from Benchmark Capital, while the asset management net inflows were zero. 

Dymott takes the view that platforms have become somewhat commoditised in recent years and fears the same could happen with model portfolios in the years to come. 

“There is an element of model portfolios becoming commoditised, there is a lot of choice out there. But for it to be useful to clients, it needs to be integrated into the advice process.

"That’s the same as with platforms. When I started out, platforms were another product, but now they are seen as part of the supply chain in the advice process. That change represents an existential issue for platforms that do act as if they are just another product. And I can see the model portfolio market going the same way.”

While there are many advice market consolidators around, many of those are backed by private equity money, and that is funded via debt.

Higher interest rates are likely to place those sources of capital in peril in the coming years, and that could leave Benchmark, backed as it is by a FTSE 100 behemoth, in a position where it could become an even bigger presence in advisers lives. 

David Thorpe is special projects editor of FTAdviser