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Tenet to launch member buyout scheme

Mike O'Brien 2

Tenet is to pilot a new buyout programme to help member firms sell their businesses and retire.

Under the plans, the network will buy up one and two person member firms and fold them into its wholly-owned appointed representative business Aspire Financial Management.

The pilot will initially involve around six firms before being rolled out more widely if successful.

Tenet managing director Mike O’Brien says to be in scope firms must have at least a three-year relationship with the network, a good claims record and other “hygiene” factors.

He says: “We are looking to do a pilot where we have existing members that we have known for a while and are looking to retire and have no other advisers in their stable.

“We are hoping to get up to half a dozen firms where we take on their client banks, service them, engage with them and keep the original adviser involved for six-to-12 months after. If we can make that work practically and economically then we will expand that out to others.”

O’Brien adds: “We are not interested in the big firms because what has happened with others is they buy a firm, which is actually the principals, but the advisers stay in touch with the customers and they walk off into the sunset together. So what you’ve bought does not have any value.”

Acquired businesses will typically receive a multiplier of known recurring income between 2.5 and 3.5, O’Brien says. In addition, bought-out owners can receive introduction fees of around 20 per cent.

Tenet also runs a practice buyout programme where members can apply for an 80 per cent loan to buy out another member. The network has lent about £6m over the five years the scheme has been in place.

Old Mutual-owned network Intrinsic has a similar scheme in place. Last year Money Marketing revealed concerns that the terms of Intrinsic’s loans could breach FCA inducement rules.

But O’Brien says Tenet’s scheme is not caught by the rules, which state loans must be on commercial terms and providers must not be able to exercise any influence over the advice firm.

Early this week Tenet snapped up the client bank of Furness Financial Advisers, following a strategic review by its parent Furness Building Society.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Excellent idea.

  2. It may be an excellent idea but it’s an old one. The market is busy with consolidator firms who have not only been doing it longer but all seem to follow the same ‘shape’ in offering multiples of earnings.

    Nexus IFA see more value in offering a share of recurring income for a longer period (say 10 years) – do the maths

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