Projected to conclude before next year’s Budget announcement, at first glance the ongoing Financial Advice Market Review – piloted by the Financial Conduct Authority in conjunction with the Treasury – could be misconstrued as just another chapter in the litany of post-crisis regulatory appraisals.
Having recently wrapped up its 30th acquisition in less than three years, Reading-based financial planner Bellpenny is poised to announce a further two deals in the next fortnight before switching its focus to larger firms.
However, Stockton issued a warning that the review could herald unprecedented changes in the way that both Bellpenny and their contemporaries go about their future business.
“The current FCA advice review is going to be quite far-reaching and there could potentially be a lot of change around how firms deal with smaller clients,” he said.
“We are going to be looked at and told that we have to be able to give everyone advice.”
With the implementation of the retail distribution review in December 2012 having already brought about fierce competition with the advice space over costs, Stockton believes that, not only could the price war intensify, but the ramifications could include a marked increase in already burgeoning M&A activity.
“[The concept of] face-to-face propositions for clients with £150,000 or so is well-established,” he said.
“The issue for firms like us is how to cost-effectively get good advice to clients with £30,000-£40,000. Can we afford to have an adviser sit down for two-and-a-half hours and do a full fact-find with a guy who has £30,000 to invest? No – it is going to take some thought as to how we are going to handle that.
He continued: “Client costs and regulatory oversight costs have become so expensive compared to what they were that you need to have scale and spread those costs. The interesting thing is whether or not consolidation will be kept down in the years ahead, and I do not think that it will. In five years there will be 10 firms doing 90% of financial planning.
“The industry going to move from having lots of small firms to a handful of big ones; there will be space for wholly independent small companies doing specific client propositions, but more and more we will see fewer, larger firms. RDR is going to force that.”
In line with this view, Stockton confirmed that, following completion of deals in progress – including two due to be announced “in the next couple of weeks” – Bellpenny will be targeting larger, more established businesses as its seeks to keep ahead of the pack in the wealth manager acquisitions race.
