Sanlam Investments and Pensions  

Adviser consolidation sparks fee debate

Adviser consolidation sparks fee debate

The financial advice sector could see a correction on fees and charges as more advice firms are merging into large players with increasing market share. 

The first half of 2019 has witnessed an acquisitions market seemingly undeterred by the political uncertainty of Brexit, with perhaps the most significant move this year being Quilter's £46.2m bid for national advice company and network Lighthouse. 

Quilter's acquisition of the Aim listed business is expected to complete during the second quarter of 2019, with the deal voted in by Lighthouse shareholders earlier this month.

It will see 400 advisers join Quilter's advice arm Intrinsic forming one of the biggest advice firms in the country and, according to consultancy the Lang Cat, the deal means almost a third of financial advisers in the UK will be with either Quilter or rival St James's Place. 

Sanlam UK is another advice firm which has been on the acquisition trail this year having bought Newcastle-based financial planning company Blackett Walker in April, and Preston-based chartered financial planner Astute Wealth Management in January. 

Last month Sanlam announced its acquisition of discretionary fund manager Thesis Asset Management, bringing the group's private client discretionary assets under management to £4.2bn and bolstering the company's presence in the south of England.

The chief executive of Sanlam UK, Jonathan Polin, joined the company in 2015 with the ambition of turning it into a "significant player" in the UK.

But Mr Polin warned whilst he believes there is space for advice firms of all sizes in the market, large scale consolidation could have its pitfalls, and that could be reflected in fees. 

He said: "I absolutely believe there is space for bespoke, very high quality independent financial advisers looking after a small number of quality clients. So there is space at both ends of the spectrum.

"I do think that getting too big, whilst with many scale benefits, does distort the market and what is very important is we become much more competitive on fees and charges than the industry has ever been before."

Mr Polin added: "All of our client bases are becoming far more knowledgable than ever before, and with greater access to information it is only right people really understand the true costs of their investments.

"The transparency of Mifid II has been a catalyst to that and will continue to be so." 

Kay Ingram, director of public policy at LEBC, also thought consolidation in the market could have the potential to make advice more affordable. But she added consolidation would not be a "magic bullet".

"At LEBC we have adopted technology to augment our financial planners which enables us to advise more people and to keep the cost affordable. This bionic advice approach is likely to make a greater difference to advice accessibility than consolidation on its own," she said. 

Other industry experts took a different view. Stuart Dyer, former chief executive of Cofunds and current chairman of introducer Soprano Mergers and Acquisitions, said he has not seen any interest from the big players to squeeze fees.