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Peter Hargreaves is an early riser. I know this because as I was motoring up to London last week, his dulcet tones could be heard on BBC Radio 5 at about 6am complaining about the Government’s 50 per cent tax plans for earnings over £150,000.

“I wouldn’t mind paying 90 per cent in tax if they could guarantee that every time I drove my car the motorways were as flat as a billiard table but they’re not,” Peter intoned, before being cut off by his interviewer.

As it happens, I have an enormous amount of respect for Peter Hargreaves. If there is one thing he has proved in spades, it is that his firm’s particular no-initial-charge business model works incredibly well, certainly if a company manages to survive the first few years’ remuneration famine.

Equally, if there is another lesson to be learnt over the years it is that other business models are far less likely to work, particularly those that focus on creating big national firms of IFAs.

Just over a week ago, The Money Portal announced that it has appointed a firm of advisers to carry out a strategic review of its business after “a number of unsolicited approaches from both an existing shareholder and potential new shareholders,” in the words of current chief executive Mark Lund.

TMP suffered the loss of several of its directors in the past year, including non-executive director Peter Simon last week.

Group chief financial officer Nigel Ward resigned in March, not even five months after joining the firm, while co-founder and executive vice-chairman Richard Craven and managing director Chris Edge announced they were leaving the group in February. Last year, chief financial officer Peter Coleman also left, four months after being appointed.

There is something about the way the company appears to function that manages to provide endless amusement – and dismay – to those of us who pore over the trade press.

There was a case that went all the way to the High Court in October 2005 over a refinancing deal.

That same year, chief executive Tony Morris was forced to step down after being disqualified as a director by the DTI. The company also had to resubmit its 2004 accounts after overstating its profits.

More recently, there was an SFO investigation into pension trustee firm GP Noble, a TMP subsidiary bought during its buying spree in 2006.

To be fair, TMP has strongly denied that the affordability of its debts, incurred in part through its aggressive acquisition strategy in recent years, which has seen it grow to a reported 1,800 advisers, is causing it any problems.

Yet there does seem to be something odd happening with some IFA businesses over the years. One classic example is Millfield Partnership, the heavily loss-making IFA which merged with the equally financially stricken Inter-Alliance group in late 2004.

I described the merger at the time as two drunks propping each other up and so it proved, with Millfield Partnership staggering on until 2006 when it was taken over by – guess who – TMP. In a bizarre twist, accounts subsequently published in 2008 showed that TMP spent £6.7m on “incentivising” 600 RIs from the Millfield Partnership to remain with the firm.

History shows other firms have also had problems. Berkeley Berry Birch being a classic case in point – a firm that faced a series of regulatory fines and other interventions by the FSA before finally going bust and selling some of its subsidiaries to Tenet.

Oh and by the way, GP Noble was formerly part of Berry Birch & Noble, the precursor to BBB.

As I write all this, I have been trying to figure out how this can happen.

Perhaps the business model itself is deeply flawed, relying on a simplistic proposition, where the number of RIs you have working for you is what determines commercial success.

Instead of focusing on developing a long-term business strategy, with a few well chosen acquisitions, some of these firms have decided to go for rapid expansion instead. They end up swapping up to 1,000 advisers between each other, like football cards in a school playground, before failing miserably and being taken over, yet again.

In a straight choice between the Hargreaves Lansdown business model and the one that I have described, I know which one I prefer.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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