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‘RDR will drive consolidation’

Consolidation is set to accelerate in the intermediary sector this year as the retail distribution review shakes out the weaker performers, predicts Cavanagh group director Simon Redgrove.

He believes many smaller adviser firms will be forced into consolidations in the second half of this year.

Redgrove says: “It is going to be a case of the stronger propositions getting stronger and the weaker propositions getting weaker. Many of the smaller businesses which attempt to go down the wrap platform and discretionary fund management route will struggle to compete with their current charging structure.”

With £16.5m turnover and profit of around £1.6m in 2007, Redgrove is optimistic about the future for Cavanagh. He says: “We are reaching a defining point in the industry. There are a lot of idiots out there who do not know what they are doing and are just focused on commission. The RDR is going to completely shake up the marketplace.”

Half of Cavanagh’s business is in the corporate sector and the company has around 40 specialists dedicated to financial planning advice in the legal sector.

Redgrove says this niche client base has helped shield the company from the economic downturn.

He says: “Of course, we are not immune to the credit crunch but we are dealing with top QCs here, so instead of earning a million, they are perhaps looking at earning £800,000.”

On future growth, Redgrove says: “I am looking to take the top 20 per cent of advisers from other businesses but our emphasis is on organic growth rather than pure acquisition. The sector has to consolidate. This will bring desperation to some of the smaller businesses and prices will go down. Low prices always make it a good time to buy.”

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