Network will target independent businesses and unsettled or dissatisfied intermediaries
Financial services provider Cater Barnard is to create a national service provision network, providing an exit route for small to medium-sized advisers wishing to leave the industry.
The company, listed on the AIM market and based in London and New York, is seeking both to acquire independent businesses and poach unsettled or dissatisfied intermediary firms from existing networks.
It is undergoing a share issue to raise up to £7.557m in order to fund the transformation to financial services from a holding company acting as an incubator for start-ups in the information technology and internet sectors.
Its new strategy, ratified by shareholders at the group's AGM in April last year, is to acquire an as-yet unidentified UK business, for which it is in negotiations, as a base to unite a number of currently independent financial advisers in the UK. It will offer centralised services to build a national brand.
This will offer small to medium sized intermediaries with an exit strategy from their businesses, with Cater Barnard targeting companies that have a minimum turnover of £200,000 to £300,000.
Mark Garratt, UK managing director at Cater Barnard said: 'The current uncertainty in the financial service market, and the ever increasing compliance burden, means a lot of older intermediaries will be considering their future. We will be looking at acquiring small to medium-sized provincial intermediaries, who have a dominant position in their local area.'
Garratt said that Cater Barnard recognised that many intermediaries were unhappy with the service they were receiving from some existing networks.
Services that Cater Barnard will provide include corporate finance, compliance, training and bolt-on product packages. The company claims the cost of these services will be significantly lower than existing networks.
Acquisitions would be funded through the issuance of shares, and would involve a significant handover period. The company's first purchase is likely to be completed during the second quarter of this year, said Garratt.
Mark Dampier, head of research at Hargreaves Lansdowne, and formerly of intermediary network Interdependence, said he felt discontent with existing networks means there is room for another player in the market, particularly if it is significantly cheaper for members than the established players.
However, he warned that he could foresee problems for the new business under certain circumstances.
He said: 'Advisers that use networks tend to be smaller, less profitable operations. Companies that are doing well tend to leave, because as they expand they find they can't justify the expense as it's often cheaper to carry out functions such as compliance in-house.'
'Although the network will be in a perfect position to scrutinise the quality of a lot these businesses, what will they be buying? My main concern would be that they might end up paying too much for poor businesses. The problem is most advisers think their business is worth a lot more than it actually is, and if they don't get the sum they think it is worth, they won't sell.'
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