New IFA consolidator outlines 80% trail masterplan

Simon Chamberlain’s new IFA consolidation vehicle has outlined plans to turn adviser firms with minimal trail income into businesses generating 80% renewal commission.

Using unique auditing software, Succession Advisory Services will be able to identify where it can add a trail charge to non-profitable business but still save the client money by switching certain assets onto a platform.

The firm, which launched in May, was officially unveiled last week and plans to "engage" with 85 IFA firms, bringing together more than £7bn funds under management.

"Some of these companies will have only 20% trail commission when we walk in the door," Chamberlain says. "It will be 80% when we're finished."

Chamberlain says firms that join Succession will undergo a two-week audit using Legacy Asset System (LAS) software.

LAS identifies IFAs' back books of business that do not generate any renewal income, splitting clients' assets into those that can be transferred onto a platform at no cost, such as collectives, and those where advice would be needed.

According to Chamberlain, a typical IFA firm with five advisers may be managing upward of £18m of client money for free.

He says Succession will calculate the cost of transferring suitable assets onto a platform, taking into account all the costs involved.

After adding a 0.5% charge for doing this, Succession says if the total cost is still less than the charge the client was originally paying "it is in the client's best interests to make the switch, and the adviser will be earning again".

Succession, which went live on 1 May and has already begun working with five IFA firms, was founded by former Thinc (now Bluefin) CEO Simon Chamberlain alongside ex-Thinc director Tim Parsons, Hambro Fraser Smith founder Andrew Smith, and ex-Barclays director Paul Morrish.

It says as well as inputting a "sustainable" business strategy, Succession provides a guaranteed exit partner for those principals seeking to leave the market.

It will take over the investment management of client money from partner firms via its in-house Investment Matrix, enabling advisers to focus on financial planning and relationship management.

The Matrix, developed using risk and research specialists Rayner Spencer Mills, will call on the expertise of seven fund managers, global and specialist.

Confirmed earlier this week, they are: Schroders, F&C, Jupiter, Scottish Widows Investment Partnership (SWIP), Frontier Capital Management, Tactica Fund Management and Seven Investment Management (7IM).

Case study at ‘typical' IFA firm

Number of advisers: 5
Number of clients: 162
Number of funds: 1,362
Total value of non-renewal commission business: £18m
Re-register (no cost): £9m
Transferable (with cost): £3.6m
Advice needed: £5.5m