St Albans-based Lumin Wealth only recently completed its second acquisition but the firm shows no sign of stopping its M&A ambitions.
It bought London-based IFA firm Everett MacLeod for an undisclosed fee, several months after acquiring Bedfordshire-based advice business Hyperion Financial Planning in April 2019.
Martin Cotter, managing director at Lumin Wealth, told International Adviser: “We think we can do two good ones a year, at the moment.
“We did two last year if you count Everett McLeod, we actually did all the work on it beforehand, just Christmas got in the way.
“We believe there’s lots of opportunities in the market and we do have to filter through them to get the ones that are right for us.
“We’re not just going to buy companies just to get the assets under management. We’re a discretionary fund manager, [with] our own in-house investment proposition and client servicing, so what we buy has to be able to fit into what we do.”
However, Cotter said the firm is “well-funded”, so further acquisitions will not be a “problem”.
So, what is Lumin Wealth looking to buy?
Pointing to the recent M&A deals, he said that the principles have “stayed on with the business”, which means target firms have to be of a sufficient size to be able to “keep the adviser on”.
“We’ve seen people who want to let go of some things. I think it’s an exit strategy, but it might be a five-year exit strategy.
“We take all the strain and all the things that they never really signed up to 30 years ago when they got into the business, such as high levels of compliance and regulatory reporting.
“We enjoy having these people bring in all their experience to some of our younger IFAs, we’re quite keen to bring a new generation in, and we’re quite keen to modernise the way people are serviced as well.”
He added that the firm is looking to stay in southeast region, as it allows Lumin to “keep its identity better”.
Most acquirers have a stringent due diligence process.
Firms look for long-term complications before completing an M&A deal, such as issues with defined benefit pension transfers.
Cotter said that Lumin Wealth looks at “people charging too-high initial fees”.
He said it’s a red flag that suggests the firm “may be not treating everyong fairly”.
“We don’t like companies that hide behind certain tax breaks or other things; rather than being a straightforward financial adviser, who is there for your good.
“We’re not very keen on investments that should be for sophisticated investors.
“Our view is, if it’s for sophisticated investors, then why do you need a financial adviser to execute that business.”
As well as due diligence, M&A-hungry firms also have to work with the Financial Conduct Authority (FCA) to get the deal over the line.
The FCA is not everyone’s cup of tea, but Cotter was complimentary.
“They are extremely thorough, but I think what they doing is fair,” he said. “We’re not anti-regulator and we’re not anti-compliance because you can see, as soon as focus slips, the trouble that happens to the industry.
“They’ve asked all the right questions. They’ve taken the time to understand what we’re trying to do, and it seems to work quite well.
“I’m not against the processes we’ve had to go through to get a change of control because it’s valid, there’s too many people changing controls and moving companies around for other reasons, which I think is not good for the industry.
Lumin Wealth has around £500m ($650m, €574m) in AuM.
Cotter said that the firm would be “extremely happy” if it had around £1.5bn under management in five years’ time.
But he added that it was not totally reliant on acquisitions to boost AuM, as Lumin had “good” organic growth.
“Because we don’t advertise, I say we’ve been quite a well-kept secret, locally,” Cotter added.
“We are on a bit of a mission to get our name better known locally and amongst the professional firms we work with and more firms who we should work with.”