Regulation  

M&A activity in advice market starts year strong

M&A activity in advice market starts year strong

Financial advice companies and wealth managers have demonstrated that January is shaping up to be no quiet month as far as merger and acquisition activity is concerned

There have been plenty of deals, suggesting 2020 might be a busy year indeed for buyers, sellers and the broker.

On Monday, Quilter Private Client Advisers announced it has purchased national advice company Prescient, adding more than £800m in assets under advice.

The deal, for an undisclosed sum, will see 23 staff, including eight advisers and three trainee advisers, join Quilter and relocate to the company’s existing regional offices.

Dominic Rose, strategy and acquisitions director at Quilter Private Client Advisers, said: “We believe this acquisition reaffirms our model is continuing to help business owners realise the value in their companies, while delivering good outcomes for clients.”

Last week, Lumin Wealth entered into its second deal with the acquisition of London-based IFA Everett MacLeod. The deal consideration was not disclosed but the move will bring more than £45m of assets under management to Lumin Wealth.

Indeed, Lumin Wealth made its first acquisition in April last year when it bought financial planning company Hyperion and is keen to continue.

Martin Cotter, managing director of Lumin Wealth, said he would be pursuing other purchases over the course of the year, adding he had already been approached by companies looking for a partnership that would allow their businesses to grow (see page five of the print edition of Financial Adviser for the full story).

There are many reasons why advisers are looking to sell, long after the Retail Distribution Review – the event justifiably blamed for a brain drain of advisers – was done and dusted. First, there is a significant number of advisers who are approaching retirement age. There are also plenty of buyers, whether trade buyers, product providers seeking distribution or industry consolidators.

Some blame has also been laid at the foot of the additional regulations introduced by Mifid II making it ever-more expensive to run an advice company.

Derek Bradley, chief executive of Panacea Adviser, said: “Years ago, Reading was the regional headquarters for just about every major provider in the UK. Today, just Prudential is left.

“Regulation and its cost is seeing continued unexpected consequences manifest themselves in what some may see as a fight for survival of the fittest.

“Brands are merging and more will follow; IFAs are consolidating and more will follow. Financial services had been considered a job for life, but not any more.”

Mr Bradley said he believes pricing squeezes on the cost of advice has created significant pressure and called it the ‘waterbed effect’.

According to him: “The waterbed effect is the natural, but not necessarily intended, potential to squeeze one part of a complicated and complex regulated business model (and the attendant regulatory processes) to cause a serious bulge elsewhere in the process.