The industry remains open to companies of all sizes and small financial advisers are prospering despite burdensome regulation, the chief executive of Lighthouse has said as he revealed the reason for wanting to sell his firm to one of the biggest players in the market.
Last week Quilter announced it had agreed a deal to buy AIM listed Lighthouse, which if approved is expected to complete during the second quarter of 2019 and which will see 400 advisers join Quilter's advice arm Intrinsic.
The deal means almost a third of financial advisers will be with either Quilter or rival large firm St James's Place, according to consultancy the Lang Cat.
But speaking with FTAdviser yesterday (April 8) Malcolm Streatfield said there was "room for everyone" in the industry, including very large, medium and smaller sized companies.
He said: "I am a firm believer there is space for everyone, all have their right to trade."
Mr Streatfield acknowledged there had been a "tsunami" of regulatory requirements entering the financial advice sector which had made it costlier for firms to operate, including the General Data Protection Regulation, the Markets in Financial Instruments Directive, and the Senior Managers & Certification Regime.
He said: "It is, without a shadow of doubt, increasingly more expensive for an entity, let alone one of our size, to be a business."
But Lighthouse's chief executive stressed the increasing regulatory costs had not played a direct role in Quilter's bid for the company, rather it was just a "fact" of the market.
He added: "It has never been easy for small businesses to proposer in the regulatory environment of recent years, but they have and many hundreds of them on a small scale."
Mr Streatfield said the main driver for the Quilter deal was the notion client demand had become too big to handle in its current form.
He said business coming from Lighthouse's growing affinity partnerships meant the firm either had to grow or join a bigger player.
Lighthouse's affinity business includes employee organisations the likes of Prospect, Unison, Usdaw and the Royal College of Nursing.
Mr Streatfield said: "We have 23 affinity connections and this was throwing at us a growing demand, a demand now outstripping our ability to supply.
"Unless we exponentially grew, we were in danger of generating too much activity and not being able to service all.
"We faced two options, either growing organically or, the best option, to align with an organisation who had the infrastructure in place to meet the growing client demand, i.e. Quilter."
Mr Streatfield confirmed he does not envisage any adviser "having or wanting" to leave the company as a result of the transaction, stating the advisers' business would not change as a result.
This comes after it emerged last week advisers in the firm's network will be given the choice of whether to remain independent or become restricted once they transfer to the Intrinsic network at Quilter. The jury is still out on advisers in the national business, however.