Specialist
Former executive at True Potential LLP
Agenda
- True Potential's competitive positioning vs other large wealth planners such as St James's Place (LON: STJ) and Quilter (LON: QLT)
- Organic growth trends in funds under management
- Advisor acquisition including multiples and upfront incentive trends
- Longer-term trends in advisor share of fee income
- Post-acquisition asset allocation and implications for platform costs
Questions
1.
Could you discuss True Potential’s business model and how it compares to other players? I don’t know whether to compare it to players with more of a retail proposition – such as Nutmeg, Moneybox and Wealthify – more full-service such as QFP [Quilter Financial Planning] or SJP [St James’s Place], or a platform-led business such as AJ Bell or Hargreaves Lansdown. How should we think about what True Potential is and how it’s approaching the market?
2.
What might drive asset growth, if IFAs [independent financial advisors] use the platform and services vs the restricted network advisors? I think about 450 financial advisors are with True Potential at the end of 2021 vs D2C. How do those different channels impact the economics of a company such as True Potential?
3.
What typical advisory fee is the industry charging clients? True Potential’s website talks about 0.4% for the platform and around 0.76% for product and what you’re invested in. Is advice on top of that?
4.
How much compression do you expect on the total fee payable by the client longer term? People seem to think platform and product charges are quite low already and maybe there’s scope to lower advice charges. Could compression reach a 150-170bps range? Might that come from platform, product or advice?
5.
Do advisors take all of the advice charge as their fee?
6.
Are IFAs that are using outsourced capability more likely to invest in True Potential’s products vs others? I think the company talks about 25% IFAs, or 25% of the market, using that back-office service.
7.
Do you expect an environment in which advisors are retaining an increasingly larger share of the advice fee? Could any larger players offer advisors comparably high percentages – or even let them have 90-100% – and use that as an attractive channel to gain assets, then charge the platform and product fees on top?
8.
Where might asset growth come from? Is it from growing the restricted advisor network or creating a compelling platform and proposition that attracts IFAs and their portfolios? Which is more important?
9.
Might most gross in-flows come through the restricted network for most wealth managers with that kind of wealth management division, given the broader shrinking of the IFA industry?
10.
What leverage does an advisor with a portfolio have when thinking about going restricted and who to go with, and how could this change given the dynamics? Arguably they can use that scarcity to create savings for their clients, passing that benefit down the line. How could that change the approach of True Potential vs SJP or Quilter when trying to acquire the advisor and their portfolio?
11.
Maybe this is a poorly phrased question, but are multiples really going up, as such, or the IFAs that are being acquired, are they just less profitable than they were a few years ago, because of those increased costs?
12.
Is it appropriate to use an AUM [assets under management] percentage to examine valuation, as opposed to a multiple of profitability in that context? Larger networks have obvious scale benefits when onboarding assets. Could that demonstrate the same increase?
13.
What leakage would you expect in the normal process of IFA or portfolio acquisition? We discussed it in 2021 regarding Quilter and how 20-25% of assets are sometimes lost in that process as people don’t want to move and so on. Is that a leakage benchmark?
14.
What can platforms do to minimise leakage? In our 2021 conversation, Quilter came up as an example of a company that’s very good at managing that transition and minimising leakage. What do the best platforms do to optimise for that?
15.
A news story from a couple of days ago discussed Hargreaves Lansdown pushing regulators for less strict definitions of a regulated financial advisor being able to provide more advice that’s considered guidance, as opposed to regulated advice. Could having restricted advisor networks impact SJP, Quilter or True Potential, if Hargreaves Lansdown can steer clients more actively without falling under the purview of being specifically regulated financial advice?
16.
Do you expect valuations to continue rising given the competitiveness of inorganic growth and IFA acquisition? Alternatively, have you experienced a plateau in valuation multiples?
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