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Buying into an acquisition strategy

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Sheriar Bradbury used youth to his advantage when he set up Bradbury Hamilton in the early 1990s. He spotted early on that many advisers nearing retirement would not want to meet the requirements of changing legislation but would want to ensure that their clients were looked after. He built his business acquiring the client banks of retiring advisers. Eighteen years and 39 acquisitions later, Bradbury Hamilton is a thriving enterprise.

Bradbury started in financial services in 1986 with a company called Barchester Group, a direct-sales organisation. He left in 1991 to join Barclay Morgan, which had been set up by an ex-colleague. In August 1993, he spotted a gap in the market and decided to set up Bradbury Hamilton.

He says: “When I started the business, I thought that there were certain things that would happen. There would be more regulation, there would be greater exam requirements. At that time, the average age of an IFA was 54. I was 30.”

The industry was in flux and Bradbury believed that a different type of adviser was likely to emerge. This suited him as he had found the hard sell of the existing advice model uncomfortable. He wanted to build a business that was able to cope with the changes in regulation but could also take advantage of them.

He says: “We realised that a lot of people would not want to go through those changes. It was too late in their career. They wouldn’t want to produce lengthy reasons why documents or meet the new exam requirements. It was already getting harder there was the pension review and many advisers were finding it quite difficult. I reasoned that if I bought the client banks of retiring IFAs, it would be like getting 500 referrals all in one go.”

Hamilton went on to make 39 acquisitions and now has a database of over 45,000 clients, of which about 2,000 see significant activity. He has moved from a one-man band to now having seven RIs and a total staff of 25.

In general, in the businesses he takes on, the businessowner is looking for an exit, so does not become part of Bradbury Hamilton. However, he has occasionally taken on advisers. For example, he did an acquisition at the end of last year of the financial advice arm of an accountancy group and two of the advisers became part of the Bradbury Hamilton group. The profits are shared 50/50 between Bradbury Hamilton and the accountancy group.

Bradbury Hamilton is structured so that advisers do not write the final reports for clients, which is left to the paraplanners. Bradbury says: “We believe that advisers have good people and strategic financial planning skills. They will control the direction of advice while the paraplanners do the detailed report-writing work. There are also administrators to help the paraplanners.”

He says that administration or paraplanning can be a career in itself at Bradbury Hamilton but in theory anyone could end up as an adviser if that was their chosen path.

The firm has been through a number of client segmentation exercises and now has a clear client service proposition in place. The level of service will depend on the revenue a client generates. At the lowest level, clients will just get an updated policy statement once a year. Above that they will receive a fully rebalanced portfolio in line with their risk profile.

In building client portfolios, the group has its own fund panel. It does not have discretionary permissions but takes research from Citywire, OBSR and other groups. It uses Dynamic Planner to build an asset allocation for clients based on psychometric questions that give clear guidance on a client’s attitude to risk. Bradbury says he a “big believer” in wrap propositions and currently uses Nucleus, Transact and Skandia, depending on the client’s needs and portfolio size.

Bradbury believes the group is largely RDR-ready. Every client signs a fee agreement before the work is done, so the end of commission should not pose any significant problems. He says there are a number of advisers with a few exams still to sit but the majority are QCF level 4 qualified or higher.

There may be issues around gap-fill, however, and Bradbury is waiting to see the outcome of the most recent consultations. Where he is looking to buy businesses, he does not insist on all advisers being QCF level 4 and above. “We are not looking for the ’superb’ practices that are completely RDR-ready. We are looking for those that may still have some way to go, where we can add value.”

The next big opportunity is likely to come from the Legal Services Act. Bradbury is looking to forge partnerships with legal firms to move towards his ultimate aim of building a multi-disciplinary practice. He plans to do this via a series of joint ventures with legal, accountancy and other professional services practices.

He says: “A lot of clients we see don’t have wills, for example. Or they might need specialist trusts. We can put clients their way and, in turn, they can move clients back to us. We will continue to acquire IFA practices, but in the long term we want to build a fully multi-disciplinary practice.”
Bradbury spotted an opportunity when he began to build the firm in 1993. It is telling that he thinks he has spotted another one. The multi-disciplinary practice may well be the model of the future.

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