Former Centrepoint chief says ‘consolidation’ looming

The listed advice group’s former CEO Angus Benbow told ifa there needed to be “a round of consolidation” in the non-aligned licensee space, and that Centrepoint was “well-placed” to participate in a deal with another mid-sized group.

“The pathway forward, be it the likes of Centrepoint or the other larger non-aligned big 6 advice groups is that there needs to be a round of consolidation,” Mr Benbow said.

“Centrepoint is well-placed to participate in a merger, be an acquirer or being acquired. At that end of the market it doesn’t matter who is taking over who, it’s about bringing the scale of larger businesses or dealer groups.”

Mr Benbow – who has landed at digital fitness start-up Wimp2Warrior as its CEO after departing Centrepoint in May for personal reasons – said while the non-aligned sector was ripe for M&A activity, takeover offers were unlikely to come from private equity groups whose medium-term exit pathway from advice businesses was unclear.

“The conversations I’ve had prior to my involvement with Centrepoint was that private equity has struggled to look at if there’s an advice consolidation how do they get out, because they have a five to seven year horizon,” he said.

“If you look at Quadrant [Private Equity]’s investment in Fitzpatricks, those kind of piggyback deals into advice haven’t gone to plan. 

“It makes sense for private equity players to go into platforms through CFS, and depending what happens with BT and AMP/North – that’s a deal they would do well out of, but in advice it’s a disaggregated market which is difficult to monetise.”

Mr Benbow said he was proud of his achievements in his three years as Centrepoint’s CEO, but that there was “more to do” for the group to reach the scale needed given the costs of doing business in the advice industry.

“Essentially I found a business that wasn’t in the best shape but I stayed committed to turn it around financially – certainly there was more to do in terms of consolidating with other companies, but in the end my focus wasn’t in it,” he said.

“At the half-year announcement in February I flagged that [Centrepoint was] well positioned to participate in consolidation, and strategically that is a path forward for the group and the industry.

“You can’t have hundreds of mid-tier licensees because there are certain fixed costs in running a licence and for 100-150 advisers, it’s a lot of work to make sure everyone is doing the right thing. 

“From a Centrepoint perspective, it’s got a healthy balance sheet and it’s a clean business now with good strategic capabilities that would be very attractive to scale up to other groups.”