When David Lawrence took on the first chief executive role of his long career in financial services in December 2020, he was walking into a storm.
The new boss of advice market consolidator Kingswood was not merely faced with the pandemic, and the stark uncertainty in markets it created. He was also charged with trying to source and value acquisition targets in a market that is both filled with uncertainty as well as rival businesses also trying to buy advisers.
Lawrence admits that “valuation expectations” have risen as more buyers enter the market, especially for the medium to large advice companies, but says it has not got to unreasonable levels as “while there are many firms looking to acquire, there are far more looking to be acquired”.
Kingswood has acquired five advice companies in the past two years, backed by the capital of its private equity backers, who hold a stake.
Lawrence says “finding value for money” with the acquisitions they undertake is a priority, and he has a number of guidelines to help select acquisition targets.
He says: “We want to be able to achieve a 20 per cent return on investment over the medium term from the investments we make. We can be quite flexible in our buyout models.
"As a listed business we can use Kingswood shares as part of our kitbag, as well as cash. In terms of the types of firms we are trying to buy, we want businesses that are hungry to grow.
"Mature businesses where the owners want succession planning is less appealing to us. We don’t want a situation where we are buying a firm and the principal adviser leaves.”
He says the most common question asked of Kingswood by advisers of companies they acquire is: "'Can we [at Kingswood] take away all of the stuff that isn’t advice?'
"And that is what we want to do. We can do compliance and the governance, and we have a chief economist, and an investment team. So if we do all of that, then what is left in the firm we acquire is the advice, and that is where a lot of value is.”
He says many of the areas that advisers want increasingly to focus on are those such as tax planning and post-retirement planning – “areas where they cannot get it wrong”.
The company has risk-weighted model portfolios, including income and environmental, social and governance mandates.
Lawrence joined the business having previously been chief commercial officer at Schroders Personal Wealth, and prior to that, worked for more than two decades within Lloyds Banking Group, latterly aschief commercial officer and chief operating officer for UK wealth at the private banking arm.
Lawrence says helping to set up SPW from scratch and to integrate clients coming from both businesses into the new entity provided him with valuable experience in his current role, and also the confidence to pursue the chance to become a chief executive.