Brexit and a lack of opportunity in the market put Sipp provider James Hay off buying any rivals during a “challenging” 2016.
The company has been vocal about its intention to take advantage of the trend towards consolidation of providers in the personal pension and platform markets, but made no acquisitions during 2016.
A number of self-invested personal pension (Sipp) providers tend to focus on smaller legacy business, which James Hay chief executive Alastair Conway said forced him to rule these rivals out as acquisition targets.
Instead he said James Hay put more focus on contemplating snapping up Sipp provider rivals that are investment-led.
Mr Conway said James Hay’s Modular iPlan product was geared towards adviser firms that are “very much investment led” and those that are “running much tighter models now with investment committees”.
“We’re seeing the larger and more substantial IFA firms operating with that sort of model, therefore if that is where we’re devoting out time, attention and focus then some of the smaller legacy Sipp businesses won’t always fit with our direction.
“We look at things and make sure we consider them but we’ve got tight criteria for what looks good,” Mr Conway said.
Parent company IFG Group chief executive John Cotter called 2016 a “challenging year” due to uncertainty at a macroeconomic level, mainly around the UK’s decision to leave the European Union but added the company has been “pretty explicit” that it has continued to look for acquisition opportunities.
While the company did look for potential companies to acquire last year, Mr Cotter said that he did not find any that fit with the long term strategy of the business.
“We did look at opportunities and we continue to look at opportunities, but they have to be opportunities that are additive to our business. We set a high bar on acquisitions.
“To the extent that acquisitions can fit within that we will pursue them aggressively, we have the capital and balance sheet strength to do that.”
The company offset a comparatively quiet first three quarters of 2016 with a strong finish to the year, as Mr Cotter said the business experienced a “noticeable upturn” in volumes that he said have continued into the first quarter of this year.
“I think it is evident that if there was a holding back pre and a little bit post-Brexit that seems to have passed and the market is busy again.
"If there was any Brexit lag that seems to have cleared its way through now."
Scott Gallacher, chartered financial planner at Rowley Turton Private Wealth Management, was sceptical that Brexit could be a viable excuse for putting off acquisitions and the lack of transactions was more likely due to not enough opportunities in the market.
An uncertain market environment and weak sterling following Brexit would make it difficult for UK firms to acquire foreign companies but should not have an impact on domestic deals, according to Mr Gallacher.
“If you’re buying a UK business then I don’t see how Brexit makes a difference, but if it is an international business then it would be an issue.”
James Hay benefitted mainly from organic growth during last year as continued demand for pension flexibility and an increase in defined contribution (DC) and defined benefit (DB) consolidation boosted inflows by 42 per cent during the fourth quarter of 2016 compared to the same period the previous year.
Parent company IFG Group reported a 13 per cent increase in assets under administration (AUA) to £22.1bn during 2016 with total net inflows of £1.7bn and an adjusted operating profit of £7.1m.
julia.faurschou@ft.com
