Target companies Brett & Randall Financial Services (BRFS) and Chilli Financial will bring in excess of £250m in assets under management to the Fairstone Group.
Currently, it manages more than £8.1bn of investment and pension assets for 41,000 private clients.
BRFS and Chilli Financial are the first to enter Fairstone’s downstream buyout programme or DBO this year. The programme gives so-called partner firms typically a four-year window to integrate into the business, making use of economies of scale, before they are fully acquired.
Meanwhile, partner IFAs are able to retain ownership of client relationships and autonomy.
Fairstone, as the regulated entity, takes on the burden of reporting to the FCA and provides IFAs with a compliance framework that helps reduce risk. Regulatory costs, including FCA fees and the FSCS levy are covered centrally and they are covered under Fairstone’s professional indemnity and data protection policy.
Fairstone anticipates that it will see a total of nine DBO acquisitions, including BRFS and Chilli Financial, over the course of 2018.
The BRFS and Chilli Financial deals will see an additional 13 advisers and support staff join the wider Fairstone business as well as combined revenues of £1.8m.
Lee Hartley, Fairstone CEO, said the DBO programme has taken off within the last year, resulting in an average organic growth rate of 15% within its existing partner firms.
“We have seen enormous growth through our DBO programme in the past year, from IFA companies who recognise the strength of our proposition and the benefits of adopting our proven approach for clients,” he said.
“Where we identify real quality in a business, we will work with those companies to achieve their growth targets, lift the regulatory burden and support them with marketing and client activation initiatives.”
Commenting on the deal with Fairstone, Chilli Financial business principal Ian Robinson said his firm realised it would need to adapt to keep up with the changing financial advice market.
“The financial advice market is changing rapidly and we have recognised for some time that we needed to put in place an effective plan to ensure we can continue to provide our clients with a high level of service in the future,” he said.
“It was clear from an early stage of discussions that Fairstone share similar values to us and a common view on how financial advice should be delivered. Importantly their national presence provides us with the infrastructure and support to achieve our long-term objectives. We look forward to developing the opportunity to partner with them and to grow our businesses together”.
BRFS was established 35 years ago and began advising a large number of pension schemes but has since expanded its client base to high net-worth individuals.
Chilli Financial, launched in 2003, provides advice to corporate clients, as well as retirement, investment and estate planning services for private clients.
