There is room in the advice sector for a “whole of market SJP”, Succession chief executive Simon Chamberlain says, as the business readies itself for 10 member acquisitions this year.
In a business update this morning, Chamberlain said the business’s plan is to capitalise the business in 2018 either through a trade investment or by floating on the London Stock Exchange main market.
He says Succession is approached by private equity firms on a weekly basis.
Chamberlain adds: “We are the only large-scale IFA that makes profit from advice not from fund management, then that is looking like a new model. It is looking like a whole of market SJP and that is why there is a lot of interest.”
He adds: “SJP is a great model but it is tied and it is expensive. If you can have a national with the marketing but with a cheaper and more comprehensive proposition and you can own the underlying assets, because we own our own platform and funds, then that is pretty much the perfect model.”
Chamberlain says Succession will grow “substantially” in 2017 with a further 10 acquisitions planned, which are expected to complete in next six months.
He says: “They know who they are, they are in a landing pattern waiting to be acquired. We are fully expecting by the end of 2018 to be on our core plan, which was to have £7bn of assets under our control and to have acquired 50 of our member firms to create a national business that are working out of 15 hubs across the country.”
Asked about the recent FCA review into consolidators, Chamberlain explains Succession had positive feedback on the 10 files that were submitted to the regulator.
He explains the feedback using a traffic light analogy and says nine files came back “green” and one was “amber”.
He says: “They asked us for a list of all of the replacement business we did over a period of time. Then they took a sample of 10 files away to do an audit. With us they took 10 files from firms who were in their earn-out period and that period determines how much money you get paid for the acquisition.”
“When they came back with the results of that review, we had nine green and one amber. The amber was where a client portfolio had been consolidated into a life plan and a cash flow forecast. Although the overall portfolio was cheaper, two components had some exit penalties.”
In Chamberlain’s view, one of the key things to come out of the review is that the regulator is viewing platforms as products.
He says: “Their view was that any business that had gone onto a platform was a replacement. That is not the case. A platform is a piece of technology, if you have got the same tax wrapper and the same fund manager, it is a hard argument to say that is a replacement piece of business.”
“But if they are starting off with the view that a piece of replacement business is [when] an adviser moves a client onto a platform then all of that business becomes replacement. I would imagine that 13,000 small IFAs out there that will not be able to substantiate any rationale for doing that piece of business.”