Aviva-Succession deal signals ‘substantial uplift’ for IFA valuations

Aviva-Succession deal signals ‘substantial uplift’ for IFA valuations

The £385mn Succession-Aviva deal has caught the eye of fellow adviser consolidator firms, prompting them to value themselves at higher multiples.

Speaking on the Lang Cat’s HomeGames lunchtime session yesterday (March 2), Adam Smith, chief operating officer at Fairstone, said the deal signalled a “substantial uplift” for IFA price tags over the past few years. 

He reckons the price Aviva paid for Succession Wealth values Fairstone “softly at around £700mn”. Both Succession Wealth and Fairstone can be described as IFA consolidators.

To date, Smith said Fairstone counts 50 of its own acquisitions - none of which he claimed have resulted in any redundancies. 

“To lock in that sort of multiple which shows substantial uplift over the last three of four years is great,” said Smith

“On a similar basis, it would value Fairstone softly at around £700mn, which is fantastic news when you’re part of the business and you can see that reflection of the value.”

Also on the session was John Baxter, chief executive of True Wealth Planning Solutions, who said consolidation of advice firms by product manufacturers such as Aviva was only “natural”.

“Considering the low cost of capital they’re going to be able to pay extreme valuations at the moment…There’s no doubt we’re in a valuation bubble, it’s a great time for [advice] firms to sell their businesses, particularly smaller ones,” said Baxter.

But both IFA executives were quick to highlight the two potential paths the Aviva-Succession deal could take. Either one which delivers distribution-led services, or one which delivers financial planning-led services.

Baxter said he’d like to see an advice sector emerge “that designs its own manufacturing capability” and “act[s] in the best interest of its clients”, rather than one which is seen “as a distribution outlet for somebody else's product”.

Baxter said his business, True Wealth Planning Solutions, is a “planner-led” business. He continued: “So whilst I congratulate everyone involved in Succession for what they’ve achieved, I can’t see that being a route we’d want to go down.”

Succession Wealth has approximately 200 planners, advising on £9.5bn assets from 19,000 clients throughout the UK. 

Upon announcing the deal, Aviva told FTAdviser Succession Wealth would remain independent for now, though it did hint at discussions around technology consolidation later down the line.

The acquirer intends to use Succession Wealth and its advisers to reach those of its six million customers which have not already sought advice.

Smith said the Aviva-Succession deal was a financial advice play, not a distribution play.

“We’ve seen that across the spectrum of DFMs [direct fund managers] coming into financial planning, of traditional providers of products coming into financial planning,” he said.

But he added: “The key bit I hope is different this time around is that it becomes a financial planning-led proposition rather than a product provider-led proposition.”