Consolidation in the advice market is just beginning, but there is still a place for small, well-run advice firms.
That is the message from Ascot Lloyd Bellpenny chief executive Nigel Stockton, who predicted more private equity firms will also invest in the market.
Speaking at the Money Marketing Interactive conference last week, Stockton said: “My belief is that consolidation is just starting. Don’t think we are nearly at the end; we are just beginning. If you look at the mortgage industry, the credit crunch forced some issues there. As a consequence, there are around 50,000 mortgage advisers at the moment and there are nine firms who do 90 per cent of that.”
He added that consolidation will be driven by the increasing regulatory costs, challenges with new entrants to the market obtaining professional indemnity insurance, and the average age of advisers being over 50.
Stockton said: “Do I think that is the end of small, well-run, highly professional firms? Absolutely not. There is space for everybody but consolidation will continue in the advice space and don’t be surprised if more and more private equity firms come [into the market].”
Stockton says private equity is attracted to the advice market because the businesses are scalable.
Ascot Lloyd Bellpenny is backed by private equity firm Oaktree Capital Management while Tilney Group is owned by Permira.
Stockton took on the leadership of Ascot Lloyd Bellpenny after the merger was announced in July.
Bellpenny launched an independent advice arm in January through the acquisition of EFG Independent Financial Advisers.