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A question of consolidation

Two consolidators on the best strategy for newly acquired businesses. Should advisers be merged under one brand or retain an independent identity?

Damian Keeling, Managing director, Perspective Financial Group

In the last two years, there has been a considerable discussion in the market as to whether there will be another round of consolidation. The change in economic climate brought a sudden halt to many consolidation plans as loan capital dried up and a number of consolidators’ business models proved inadequate.

However, the underlying structural issues that created the consolidation climate have not changed and there are now emerging a small number of IFA consolidators. Each consolidator will be acquiring firms using a different model. For IFA firms looking seriously at the consolidator offering, it is important to acknowledge that there are many different service propositions and to make sure they conduct their homework on each one.

Many in the market will believe that consolidation has failed in the past and is therefore destined to fail again. We believe these failures have stemmed from misguided aims and ambitions. Even today, there are consolidators in the market which are principally focused on the number of RIs within firms or that are targeting IFA firms based on their turnover. We would be surprised if these models were successful.

There are consolidators in the market that are focused on the numbers of RIs or are targeting IFA firms based on turnover

The FSA recently asked those IFA firms which are contemplating going down the consolidator route to think seriously about it. The regulator is concerned about the placing of IFAs’ clients’ assets onto a consolidator’s investment platform or even investment vehicle. It has reminded the individual firms that they must retain full responsibility for complying with all their regulatory obligations’. Clearly, there is a potential TCF issue here, plus a threat to the integrity and independence of the IFA’s advice.

We believe it is illogical to acquire a well-run, successful firm, only to then set about fundamentally changing all aspects of that business. We take a hands-off approach but provide a variety of services. We want our group firms to concentrate on what they do best, providing quality advice to an ever-expanding client base. Many of the firms we acquire harbour ambitions to grow and acquire firms/client databases themselves and our strong funding position allows them to fulfil these ambitions.

Consolidation of the IFA sector is here to stay. More propositions are expected in the next 12 months and all will be different. Firms should first ensure that their business is in the best shape and they should be certain they are signing up to a proposition that can add significantly to the business and help them meet all their goals.

Ian Darby, Chief executive, Towergate

Towergate Financial, we finished rebranding our nine businesses last November. Initially, it seemed logical
because one of our biggest customers was Towergate Partnership and they were co-located in a number of buildings. It has over 100 offices round the UK and are massive providers of general insurance to SMEs and other businesses. Therefore, in terms of client referrals in both directions, it seemed the best step.

But once we thought about it more, there were other compelling reasons to rebrand all the businesses under one logo. We felt it made for less confusion from a customer’s perspective. Having been through debate for the core business, we could not see the logic of maintaining small regional brands once we had established a large national brand.

Ultimately, we were trying to create a national brand with a local feel. This national brand would have one
customer proposition. We have taken a lot of time and energy over the past six months, creating the private client toolkit, our wealth platform
and our model portfolios. Now, we ensure that all businesses use these tools and we have not had to roll it out lots of times or adapt
it for individual businesses.

We ensure all businesses use the tools we have developed and we have not had to roll it out lots of times or adapt them for individuals

In this way, in the longer term, it is a lot less hassle to build the business under one brand. There are one-off costs of getting it done and lots of communications with advisers, staff and customers but you don’t have to do it nine times, you don’t have to build nine websites. Once you ave done it once, it is done and that is why we believe it’s the right call. We plan to continue building our business in the same way. We are still bringing in business and plan to grow both organically and by strategic acquisitions. We bought another business at the end of Christmas and they will be rebranded by the end of the month.

We are clear about our strategy with any acquisition target upfront. We don’t want to buy huge numbers of firms and can therefore be selective. We are looking for financial planning businesses that are on the road to RDR compliance, that have started the move to fees and are ready to generate part of their revenue as trail commission.

They must be willing to buy into what we’re doing, which means adopting our private client toolkit. We also want to see quality, profitability and a good customer fit. Having made our decisions on where our proposition and brand are positioned, this is not open to debate and that can put some people off. That said, we have each region running their own p and l.

We believe this leaves businesses that have previously been used to running themselves with some independent feeling.

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