Clarkson Hill casts shadow as Merchant House hit by £5.6m loss

The acquisition of collapsed IFA group Clarkson Hill continued to cause problems for Merchant House Group, which has posted a £5.6 million loss for the year ended 31 December 2011.

Merchant House Financial Services (MHFS), its IFA arm based upon the assets acquired and 188 advisers recruited from Clarkson Hill, posted a £2.4 million loss, which the company blamed on the delay in advisers being reauthorised by the Financial Services Authority (FSA).

In December 2010 Merchant acquired Clarkson Hill’s assets, but failed to secure a bulk transfer of advisers from the collapsed national IFA, headed by Mike Robinson (pictured).

The assets acquired by Merchant House included around £4 million in commission debtors, administrative staff, fixtures and fittings and the company records.

In 2010 Merchant made a £1.4 million profit, part of an overall £1.7 million profit, from its acquisition of national IFA Clarkson Hill's assets having collected £2.1 million of pipeline and trail income with a further £850,000 of commission outstanding.

Merchant said the downturn in fortunes was due to time in which former Clarkson Hill advisers were awaiting authorisation, meaning the IFA arm was dependent on the parent company.

‘This loss is largely the result of the costs related to the complex process of arranging for the authorisation of the new advisers, during which, they were unable to operate and write business,’ it said.

‘For most advisers, this lasted until March or April 2011, and for some until May and even June 2011. Had the business operated during that period, much of the loss could have been mitigated. For example, during the first three months of 2011, the average gross income for MHFS was £20,000 whilst in June 2011, after all advisers had been authorised, income was £740,000.  During this time, a team of some 120 advisors and the staff were not earning fees and had to be supported by additional and exceptional expense by MHFS and the group.’

Merchant House Group posted a pre-tax loss of £5.6 million while its shares remain suspended.

In June this year it received £2 million in funding through Beia Investment Partners which took a 17% in the company.