National financial advice firm LEBC has lost 20 per cent of its revenue by agreeing to give up its defined benefit pension transfer permissions in September, its parent company has said.
In a market update earlier today (October 15) owner B.P. Marsh & Partners – which holds a 59.3 per cent stake in the firm –stated the IFA's revenue from advice in the DB transfer market represented 20 per cent of LEBC's total revenue in the current year.
However, excluding the DB transfer business, LEBC is still expected to produce annual revenue of £19m, it added.
As a result the firm's valuation has taken a hit of about 30 per cent, to £23.9m, which compared with £35.5m in January, representing a 1.9x money multiple. The valuation dates back to July 31.
Chairman Brian Marsh wrote: "On 2 September 2019, LEBC Group Limited voluntarily ceased the provision of defined benefit pension transfer advice pursuant to a market-wide review by the FCA.
"As a consequence of this, the group has reduced the valuation of its holding in LEBC to £23.9m.
"However due to strong performance elsewhere within the portfolio, the group is still aiming to conclude the year in a satisfactory position in terms of net asset value. Our net asset value as at 31 July 2019 was £130m or 361p per share, up 3 per cent over the period, notwithstanding the revaluation of LEBC."
B.P. Marsh & Partners stated that it will continue to support LEBC as “it evolves its business, which provides a range of financial solutions, for the benefit of its customers, staff and shareholders”.
“LEBC has implemented a significant restructuring and is working on a number of initiatives, some of which have already been implemented, including its bionic advice offering,” it added.
B.P. Marsh & Partners also pledged to work closely with LEBC's management team to return the firm to the position it was in before the withdrawal from the DB market.
FTAdviser reported in September that LEBC voluntarily relinquished its pension transfer permissions to the Financial Conduct Authority, as a result of the watchdog's DB market review.
The FCA had surveyed 3,015 firms between April 2015 and September 2018 before concluding in June that too much of the advice on DB transfers it had seen was "still not of an acceptable standard".
It also voiced concern about the volumes of recommendations, with 69 per cent of clients having been recommended to transfer.
The watchdog found the average transfer advice value was £352,303, equivalent to a total value advised on of £82.8bn. This included both actual transfers and advice against it.
The FCA is concerned that firms are recommending that large numbers of consumers transfer out of their DB pension schemes, despite its stance that transfers are likely to be unsuitable for most clients.
maria.espadinha@ft.com
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