This publication recently interviewed an "aggregator" firm in the UK, which is busy pulling together groups of IFA firms in a changed UK wealth management landscape.

One of the most noticeable trends in the UK wealth management industry in recent years has been that of IFA "aggregators" snaffling up advisory businesses into networks, tapping into demand from independents to help with increasingly costly operations as compliance burdens have shot up. Firms in the UK that have been on the acquisition, or network-building trail, have included Succession Group, Focus Financial, and Bellpenny.

Another player in this field is Fairstone Group, headquartered in Newcastle in the UK's North East. With offices in London and Bristol and with a network of 265 advisors, it has risen rapidly from its launch in 2008, benefiting along the way from external capital injections. And although there have been some twists and turns in how it goes about acquiring firms, it is still very much on the hunt for suitable businesses, chief executive Lee Hartley told this publication recently. 

Hartley spoke just a few days before the business announced it was to acquire Hase Osborne Asset Management, a Buckinghamshire-based financial planning and wealth management firm. That deal brings revenue of £1.5 million ($1.9 million) to Fairstone and funds under management of around £165 million. Hase Osborne advises around 530 clients. This follows Fairstone’s acquisition of a minority stake in McParland and Partners in June. In May, the group agreed to acquire Northern Ireland-based First Financial Management.

The metrics involved fit with what Hartley said is the Fairstone approach: a turnover range of £1.25 million to £1.75 million, and an age profile of the managers of around 47, about 11 years younger than the average age of most IFAs selling up. And that is a deliberate policy, Hartley said, because his business wants to buy firms where there is still ambition to grow, rather than a desire to retire.

"We are looking for general, holistic wealth advisors," Hartley said. Fairstone looks to ink about eight to 12 acquisitions a year. 

At the core of the approach, he said, is that at the outset of a proposed acquisition, the integration of a firm starts early on in the process, rather than after money has changed hands and clients have been brought on board. This avoids the problem of disgruntled clients and advisors leaving as soon as an M&A deal has been signed because of disruption. Instead, working on integration early in the process mitigates these kind of problems.

Asked if there is a problem in the industry with clients meriting barely an afterthought in M&A deals, Hartley said: "It is highly disrespectful to clients. Disruption for no benefit is also very bad for acquisitions."

He added: "We work in a strange industry in some ways because our two main assets have legs: advisors and their clients!"

Fairstone's approach to integrating acquired businesses bears fruit, he said. In recent years, improvements to the operating models of firms has led to 17 per cent year-on-year gains in business turnover, according to Hartley. 

There are perhaps morals to be drawn by the largest wealth management shops. The sector is littered with examples of firms that have expanded via M&A, in some cases leading to defections of staff and clients, producing relatively high attrition rates. M&A continues to be a broad feature of the sector as firms hunt for efficiencies and scale, while others spin off sub-scale or overly challenging businesses. 

As for future targets, Hartley said his firm is particularly keen on chartered financial planners, and is now the largest CFP business in the country. Training and talent management is also an important priority for Fairstone, he said, referring to the work it does with Northumbria University in its native North East. There is a steady intake into Fairstone of graduates from the university's business school, and this is proving a successful pipeline of young talent, he added.