The merger between Interactive Investor and the Share Centre will make it a more formidable rival to AJ Bell and is a sign that consolidation in the sector is not letting up anytime soon.
II announced on Monday it had struck a deal to combine forces with rival platform group the Share Centre. It will acquire the entire issued share capital of the Share Centre for £62m subject to regulatory and shareholder approval and the Share Centre’s customers will migrate onto the II Group’s main trading company, Interactive Investor Services.
The deal will see II combine its £30bn of assets under administration with the Share Centre’s £5.3bn , to create a £35bn entity, bringing it closer in size to AJ Bell (£54.7bn) and well ahead of listed advised platform Nucleus (£16bn). Hargreaves Lansdown remains the dominant D2C firm overseeing £105bn in assets.
Both groups said the combination of the two businesses would create a group of greater scale that has the “capability to grow and thrive and to best serve its customers in an increasingly technology-driven and competitive environment”.
“With our fair flat fees, we have built a strong and compelling alternative to percentage fees, in a business that puts the customer first,” said II CEO Richard Wilson (pictured).
“Our purpose is to help customers take direct control of their financial future, providing tools and support to make informed investing decisions. This transaction contributes significantly to that goal.”
Investment platform consolidation is inevitable
“Consolidation is inevitable because the cost of acquiring clients through advertising, social media etc is significant, and the cost of providing a content-rich site with plenty of guides, information and education is also significant so it becomes a scale business,” said Fundscape CEO Bella Caridade-Ferreira.
Over the past few years M&A in the platform space has been ramping up.
Royal London is rumoured to be seeking out potential buyers for its adviser wrap platform Ascentric, while Embark has been busy snatching up books of business, including buying the advised client business of Alliance Trust from Interactive Investor.
Though the platform industry has surged in popularity with AJ Bell, Transact and Nucleus all floating on the London Stock Exchange, the vast majority of groups have not been able to turn a profit.
The Share Centre is among the groups that have struggled. It reported an operating profit of £0.1m during the first half of 2019, after factoring in £0.2m of one off-costs, its first since 2014. II’s last set of accounts filed with Companies House showed it made an operating profit of around £8.7m in 2018.