Announcements proclaiming the latest advice firm to be snapped up by a consolidator are standard fare these days, and have been for the last couple of years. The press releases trumpet how the latest sign-up is a ringing endorsement of the consolidator’s business model, yet often fail to disclose some of the most basic details about the acquisition, such as how many active clients there are, how many advisers, and what was paid.
One of the things that is never talked about is what happens to the client once the deal is done. Will they move platform? Be encouraged to use the services of a particular discretionary fund manager, or be automatically switched into a certain investment range?
It is those questions to which the FCA is now looking for answers. The regulator has asked the consolidators to clue it into their growth plans, but more importantly, has also asked for their approach to suitability when dealing with acquired clients.
In other words, for every client that is moved, is a robust review being carried out into whether this switch is in the client’s best interests? Or are clients being shovelled into investment ranges for no other reason than to hit an agreed target on assets under management (though perhaps the FCA is not asking this quite so bluntly. Maybe it should)?
In trying to understand more about how this market works, Money Marketing asked consolidators to talk through concerns about a lack of client care when it comes to moving clients onto certain platforms or centralised investment propositions. It is disappointing the lack of transparency apparent on the press releases has come through loud and clear in responding to our requests. All but one of the consolidators approached declined to comment. I
t is predictable but understandable that firms do not wish to discuss ongoing FCA activity. What is inexcusable is the point blank refusal to discuss the model at a high level and defend what are serious allegations of ripping off clients by pushing them into unsuitable investments.
One question it is not clear whether the FCA is asking is on taking their review beyond the consolidators. Many firms have a taste for buying advice firms – fund groups, providers, wealth managers, you name it.
At the end of the day, we are not talking about just assets changing hands, but clients. If the FCA finds evidence of wrongdoing, it will need to act quickly and decisively to safeguard the acquired clients of the future.
Natalie Holt is editor of Money Marketing – follow her on Twitter here