International financial services group Sanlam has revealed plans to expand fast and hard into the UK financial advice market with a business model to rival some of the largest vertically integrated firms in the sector.
Last week Sanlam completed a £1m deal for Tavistock Financial’s adviser network which will allow it to kick-off its push for a bigger share of the financial advice market in earnest.
The move means it now has a presence in fund management, discretionary fund management, self-invested personal pensions, advice and adviser support services.
John White, chief executive of Sanlam Wealth, said the acquisition of the network, which comes with 158 advisers and 25 support staff, would allow it to start building Sanlam Partners, what will become the main advice arm of the group.
The company is hoping to expand into the advice market at a quicker pace by using the newly acquired support services and back office systems, rather than take the longer route of building its own.
Mr White said: “Because of the partnership model we are setting up, we recognised we needed a slightly different structure and platform so the opportunity of buying the Tavistock network was an opportunity to get that. It has saved us having to organically develop that.”
Sanlam is interested in growing the network by attracting more advisers, though is not necessarily aiming to be the biggest in terms of numbers.
“We wouldn’t have been interested in a larger network because it allows us to grow from here," Mr White said.
“But I don’t see us going to 2,000 or 3,000 members.
“This way we gain both the platform but also gain a good bunch of advisers and I am pleased with the responses we have been getting.”
Mr White said the reason many networks had failed to succeed was because they were only offering their network services.
He said firms which also offer products and investments - like the so-called 'vertically intergrated' model of rivals Sanlam is emulating - can make the network model work.
The business model of owning a network, a product provider and an in-house financial advice arm is similar to that of fellow South African firm Old Mutual Wealth.
Old Mutual Wealth owns Intrinsic as well as Old Mutual Wealth Private Client Advisers, an in-house wealth management business which it has been growing through acquisition.
Sanlam has also picked up tricks from other players in the market.
Last year it restructured its business and created the Sanlam Partners initiative to give “culturally aligned” financial planning firms the chance to use some of Sanlam’s proposition and processes to help them grow.
These firms could then become part of Sanlam through a buy-out at a later stage.
This model is similar to the one wealth manager consolidator Succession uses, where it buys firms from its membership after they have integrated into its system.
Rival advice firm consolidator Fairstone also operates a similar process which it calls the “downstream buy out” model where it initially takes a small stake in a firm before buying it completely.
Mr White said that now Sanlam had bought Tavistock Financial it could begin bringing firms into its Sanlam Partners initiative.
He said: “We have a number waiting to join and we were waiting to complete these deal before we brought them in.
“We have exchanged on the contracts and waiting for FCA approval. I would say you will see a number of businesses joining in the coming months.”
Earlier this year the Financial Conduct Authority’s final report into the asset management market raised a number of concerns about conflicts of interest at vertically integrated firms.
But Mr White said he wasn’t concerned about becoming vertically integrated while the FCA was looking into this issue, saying Sanlam has been planning its move into the advice market for a while.
He said: “We genuinely do look at the client first. If our own solutions are not appropriate for the client then we look at the rest of the market.”
Last year Jonathan Polin, the chief executive of Sanlam UK, conceded to FTAdviser that the company would have to grow its adviser numbers “pretty significantly”.
Mr White added: “The important bit is we have multiple ways for advisers in the industry to join the Sanlam family.
“We have our own in house advisers, and they can either be employed or self-employed, and now we have got the network.
“It doesn’t mean I value any of the four channels less because they all give me the opportunity to talk to advisers.”
damian.fantato@ft.com
