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M&A activity among small IFAs expected to soar

M&A activity among small IFAs expected to soar

The retirement of IFA owners will be the biggest driver of industry consolidation over the next two years, according to a survey by Investec Wealth & Investment.

In a survey of just under 100 advisers, 42 per cent thought IFAs looking to retire or semi-retire would be the main driver of M&A activity.

The role of technology in creating more efficient business models was the next expected cause (34 percent), followed by evolving regulatory landscape (33 percent).

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Consolidation will be highest among small IFA firms thought 55 percent, while 37 percent thought larger firms would consolidate too.

Mark Stevens, head of intermediary services, Investec Wealth & Investment, said the baby boomer generation hanging up their boots was a factor in the expected growth M&A activity. 

"When you add the impact of new and more complex regulation and better technology you have an ideal environment for consolidation," he said.

Advisers said maintaining a high level of client service would be the biggest factor in influencing their decision on which firm they would sell to. This was followed by securing the best financial return and the possibility of remaining involved in their firm on a semi-retired basis.

Almost a third (30 percent) of advisers plan to sell their business entirely on retirement.

The ease with which IFAs would be able to sell their businesses was called into question by Mark Dampier, head of research at Hargreaves Lansdown.

"The trouble with most businesses is that they tend to overvalue them to highly," he said. 

"Everytime we look at it, it is too expensive and they want too high a price. Hargreaves Lansdown has always grown through organic growth and it has done that with no debt as well."

Mergers could be "messy", he said, not least as clients are used to dealing with a particular person.