There has been a lot of investment and interest in the UK financial advice space over the last few years.
Acquirers in the space have come from all four corners of the world – including South Africa.
Last year, South African investment and advisory business AlphaWealth bought a majority stake in Wimbledon-based IFA firm Holborn Financial via its affiliate Alpha UK Holdings.
But Alpha is not just jumping on the bandwagon by expanding to the UK. It sees the market as a growth opportunity for the company.
Scott Needham, director at Alpha UK, told International Adviser: “We’re a young business with an average age of 35. We are passionate about how we can disrupt in the industry. South Africa is a well-established market, and it has a lot of positives from an investment perspective.
“But the reality is there are significant risks there. As a developing nation, there’s political risks and so a lot of clients think it’s appropriate when they base themselves to hedge their risk by if either physically or financially emigrating. The majority of ultra-high net worth and family office wealth sits offshore from South Africa. The natural home is the UK, as it’s on the same timeline and has similar investments.
“It’s a massive investment industry as well. We have a lot of clients that are based in the UK and so it’s a very natural, organic step. We are effectively following our clients demands. We want to provide that support to South Africans in the UK.”
Potential of the UK market
Needham added that the firm is “not in the UK to buy and sell”.
“There are these big private equity shops that are just buying up businesses and lumping everyone together,” he said. “My perspective is that they lose track of the ultimate reason you’re doing it, which is the client.
“All they are doing is a commercial decision, they just trying to get the lowest purchase multiple and the highest exit multiple. We’re looking for young guys to come in to create continuity, so there is long term growth. It’s about attaching yourself to an individual adviser. There’s a corporate identity to these firms, but there’s a fine line to make sure clients are not just a number.
“We want to walk the fine line in the long term. We’re not trying to be the next SJP or Quilter. That’s not our intention. Our intention is to grow in a manner that’s deliberate and careful. We believe there’s an opportunity with the one-man bands. The one-man bands are nearly a little bit too small for acquirers to look.
“Our intention is absolutely not to do what the aggregators are doing, which is to buy and sell.”
Selling Holborn
Alpha’s growth plan in the UK focuses heavily on acquired company Holborn Financial.
So, what did Holborn see in AlphaWealth to sell the company to it?
Emyr Blease, managing director at Holborn Financial, said: “I am no different probably to the majority of IFAs in the country today. I’m old and the majority of our clients are old. The challenges that our clients want in their 30 years plus retirement is consistent professional advice during that 30 year retirement.
“As a 60-something adviser, I am not in the greatest position to provide that because I will be the same age as them.
“One of the great things that was refreshing about Alpha was the fact that they are a young company. They’re populated by young people. We as a result of that, and I have been looking at this for a number of years, are trying to get young people involved in our business.
“We’ve done that now. We have not formally set up an adviser academy, but we have a scheme running now. The first graduate of that is my son. We’ve just recently recruited another young guy and a former professional sports person. That’s what we’re looking to do, bring in young, dynamic individuals who can guide and advise clients who are in their 60s while they are in their 30s.”
Acquisition strategy
M&A deals are a big part of Alpha’s growth ambitions – but Holborn will be the firm looking to bring UK advice firms to the business.
Blease added: “We’re in the business of acquiring by partnering with the IFAs that are coming to an age where they’re thinking what’s the future for them and my clients. We are limiting ourselves to what I say local. We are looking out west as far as Oxford, out east as far as Chelmsford and down to Southampton.
“We’re restricting ourselves to people who we agree have a common culture to us and that we could work with them. We also want someone who is looking for the right fit for their clients. We’re looking at one-man bands. We’re not looking at acquiring 20 partner firms.”
