The FSA is happy with the number of registered individuals in the market but wants just a third of the firms, a growing IFA consolidator says.
Perspective Financial Group has bought eight IFAs since launch 18 months ago and, thanks to a refinancing package which has opened up another £6.5m in funds, plans to double that within a year.
Managing director Damian Keeling says: "Undoubtedly it [the FSA] wants to see a collapse in the number of firms.
"It wants the same number of people, but bigger, fewer groups. It would be happy with a third of what it deals with now."
Keeling says the growing number of IFA consolidators - Thinc founder Simon Chamberlain has launched Succession while industry veteran Garry Heath is seeking to raise £25m to fund an adviser consolidation vehicle - vindicates its decision to enter the market.
"Our model clearly works," he says. "We have done what we said on the tin. The firms we have bought have made money. Two of the firms are even set to acquire businesses themselves and we provide them with access to capital and our expertise in this area."
According to Keeling, the atypical firm it targets will turn over about £1m - of which £600k will be renewal income - and will make around £400,000 profit.
But he says it is possible for IFAs to earn too much renewal income. "One in ten of the firms we see we turn away immediately because their percentage of renewal business is too high," he says.
"Trail income is expensive to maintain and a number of firms will not be profitable unless they get a reasonable amount of initial. A lot of company expenditure needs to be done up front, and you need money to do that. I have never seen a profitable firm with an 80/20 split in favour of trail."
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created