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AJ Bell platform boss: M&A has sparked adviser due diligence uptick

AJ Bell platform boss: M&A has sparked adviser due diligence uptick
Billy Mackay, AJ Bell Investcentre's new MD

A streak of mergers and acquisitions in the platform space has sparked an uptick in due diligence enquiries by advisers, according to AJ Bell Investcentre’s new managing director.

Billy Mackay, who began in his role earlier this month, said his firm was seeing “more and more” due diligence checks being carried out by advisers on charges, functionality and service as a result of industry-wide platform consolidation over the past few years.

Deals included Lloyds’ July acquisition of Embark - which had already bought two platforms of its own, Zurich’s Advance and Alliance Trust Savings - as well as M&G’s acquisition of Ascentric in May 2020.

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The average financial adviser typically uses “two and a bit platforms”, according to Mackay. “They will have a primary platform, a secondary platform and possibly one other for specific types of client groups.”

The platform boss said the possibility of changes in technology and ownership, as well as renewed pressure on platforms to make a profit, was culminating in more wary advisers across the board.

“What you're getting now is all this M&A activity coming into the mix, which is changing the landscape both in terms of pressure to make money, and also in terms of technology change. 

“All of that is playing through the adviser market and all of the advisers out there who are doing it [due diligence] are looking more closely at charges, functionality and service.”

Despite being one UK adviser platform to avoid M&A so far - it did buy yet-to-launch Adalpha’s app earlier this year - AJ Bell Investcentre is still seeing more checks being carried out by advisers across the board.

“We're finding that more and more, we're getting inquiries from financial advisers that are going through a due diligence process.

“These things [charges, functionality and service] are likely to have some sort of change because of all this activity that we're seeing on an M&A front.”

AJ Bell, which went public three years ago, has seen its net inflows for the advised business climb 36 per cent to £3.8bn over the past year. 

“If you start with a financially strong base - AJ Bell has been profitable for many, many years - you’re able to continue to invest that profit back into the platform,” he said. 

Asked whether he has any plans as new head of Investcentre, Mackay said: “I think it's business as usual. The platform has grown significantly [over the last 15 years] from the alternate flows in the market at the moment. We'd probably be one of the platforms that are doing reasonably well in terms of net sales.”

During the pandemic, 400 of AJ Bell’s 1,000 employees were working in the office. “Our service stood up well through the pandemic. I don’t think every platform could say service levels haven’t been impacted [during that time],” he added.