Increasing regulatory demands are driving consolidation in Scotland’s independent financial advice (IFA) sector.
Bishopbriggs-based Synergy Financial Planning was recently acquired by AAB Wealth, a move that continues the trend of smaller firms merging with larger groups. Lindsays has advised on this and many similar deals over the past few years and expect this trend to continue as compliance requirements tighten.
The IFA sector is consolidating significantly, partly due to compliance changes from the Financial Conduct Authority, including the customer-centric approach required by the Consumer Duty rules. As larger firms update their practices, the standards for client servicing are also evolving.
While advisors are meeting new standards, the administrative burden of additional rules can be tough for smaller firms. For many, especially those with strong client portfolios, merging with larger rivals where compliance demands can be more easily managed is an attractive option.
An aging demographic among IFAs is also driving these changes. With years of experience and a solid client base, there are potentially greater benefits to smaller IFAs in reaching a deal than winding down their practices, especially considering the challenges of compliance and succession planning.
In many ways, consolidation in the sector is both natural and beneficial, with owners planning their next steps while ambitious operators look to expand their market share and achieve economies of scale.
Private equity investors are increasingly acquiring IFAs as part of their growth strategies, leading to the consolidation of smaller businesses under larger corporate umbrellas. This allows larger companies to leverage the strong portfolios and relationships built by experienced advisors.
For IFA owners or shareholders thinking about selling, it's crucial to have everything in order—general administration, compliance records, and up-to-date financial information.
Understanding what an acquirer needs and being able to respond confidently to their diligence enquiries are all key elements to securing a good deal.
Ian Mitchell, Partner in Corporate Law
