Consolidation is "absolutely" on the cards for the UK advice sector in 2023, a senior industry commentator has predicted.
According to Steve Kenny, chief distribution officer for Square Mile, there are three main factors as to why adviser consolidation will continue: demographics, regulation and cost.
He explained: "Consider the demographics of the adviser market. Depending on which survey you look at, the average age of proprietors ranges 56 and the 60s.
"What you have is a community where, invariably, the business is their pension, so for adviser owners to extract value, there has to be a capital event that enables them to draw value from their business and allows them to retire."
Kenny also talked about the "avalanche of regulation".
He told FTAdviser: "There is so much that is coming down the pipeline. Consumer duty is the most recent one but we also have the sustainability disclosure regulations and the unravelling of other European legislation and it can be difficult to get a handle on this.
"The third factor is cost. Every time we talk to advisers they talk about professional indemnity insurance bills.
"There are three or four professional indemnity insurers in the market who have huge pricing power and the advisers never talk about this in any terms other than acrimonious ones."
He added that the cost of living crisis is also likely to have an effect.
Kenny explained: "One of the things advisers are benefiting from [in 2022] is an increased demand for their services but the problem this brings that bringing in new recruits to service these clients becomes harder and harder.
"To bring on a trainee is a big onboarding cost, not to mention get them through the exams, so this also adds to the cost and difficulty facing businesses."
No signs of slowing
Merger and acquisition activity is certainly not slowing down; just a few days before Christmas, Fairstone bought Devon-based IFA Sabre Financial, adding more than £200mn in funds under management to the group.
Similarly, Kingswood announced that it has bought Berkshire-based advice firm Barry Fleming & Partners for £6.2mn.
A few days before, Verso Wealth Management announced its fifth acquisition this year, this time the purchase of IEP Financial.
As reported by FTAdviser, Simon Redgrove, managing director of Verso, said: “This year we completed five acquisitions and we have a pipeline of further investments planned for 2023 so the next 12 months are on track to be transformational.”
This announcement came an hour or so after Verso revealed it had also bought Heritage Independent Financial Advisers Limited.
Schroders-owned Benchmark Capital also bought a 51 per cent shareholding in Harrogate based Oculus Wealth Management, subject to regulatory approval, as reported on December 12.
