Sanlam has stepped up its challenge to UK advice giants such as St James's Place (SJP) with a £1 million deal to buy a 158 adviser network from Tavistock, boosting its assets by £1.5 billion.
Last October Sanlam set out plans to rebrand its advice arm as Sanlam Partners, a move which aimed to put it in direct competition with the largest advice businesses in the UK such as SJP and Old Mutual Wealth.
Sanlam has now made its first significant acquisition with a £1 million deal to buy a network with 100 firms and £1.5 billion of assets under advice.
The network was originally acquired by Tavistock in a deal worth £2.7 million when it bought the parent company of Financial Ltd.
Following the deal it rebranded the network as Tavistock Financial.
Tavistock will retain advisers through the Tavistock Partnership, which has 40 appointed representative firms that were previously in Tavistock Financial, as well as 100 registered individuals from companies acquired by Tavistock such as national IFA Abacus Associates Financial Services, bought by Tavistock last year.
Sanlam UK chief executive Jonathan Polin (pictured) said the deal would accelerate the growth of its Sanlam Partners network.
‘Earlier this year I announced the launch of Sanlam Partners, a way for adviser firms to leverage the benefits of the wider Sanlam Group while retaining control of their business.
‘The initial response from advisers has been hugely positive and today’s acquisition allows us to accelerate this concept, putting us in a strong position to bring on-board other adviser firms,’ said Polin.
For the year ending 31 March 2017 Tavistock Financial is estimated to have had gross revenues of £13.4 million with attendant costs of sales of £12 million and earnings before interest, tax, depreciation and amortisation of around £109,000.
Brian Raven, chief executive of Tavistock, said the network was not core to the business as it is now focussed on its investment management arm.
‘It is linked to risk. If you have part of your operation which is not core then you are carrying the risk of operating that business and that risk increases with scale. This about de-risking, to an extent, and about finding a home that fits more centrally with the strategy of a different group,’ he said.
‘We are an investment management business. Our focus is very much on assets into the investment management business but it is also about making sure that is done properly, not just profitably.'
He added that it was not fair to say Tavistock has lost money on the network, despite the reported £2.7 million initial deal. This figure included money invested in Tavistock Financial following the acquisition as well as the initial £1.5 million fee to buy Financial Ltd.
'We receive £1 million cash at completion and the benefit of reducing our regulatory capital by £500,000,' Raven said.
‘We put in £500,000 of working capital initially and were subsequently able to withdraw that from the business, which has since been profitable.'