Plimsoll, which conducts regular research of the IFA sector and looked at 2,100 leading IFA firms for its latest report, says that 9 out of 10 previously failed IFA companies companies were given the same ‘danger’ rating 2 years prior to their demise.
The FSCS declared nine firms in default in July.
Each of the 2100 Independent Financial Advisers companies included in the Plimsoll Analysis has been rated Strong, Good, Mediocre, Caution or Danger. The ratings are based on financial analysis of the firms.
The analysis shows that 1,193 firms are rated as strong financially, 158 as good, 152 as mediocre, 270 have a ‘caution’ rating and 327 are in danger of collapse.
Some 337 companies have also seen their overall value fall by more than a quarter in their latest year while most other companies have added to their overall worth.
The research also suggests that the recent spate of takeovers and mergers in the IFA and Financial Planning sectors is leading to larger firms growing rapidly and beginning to dominate the advice sector. Just two dozen firms now control nearly 50% of the advice market.
St James’s Place dominates the sector with more than 2,500 advisers. Towers Watson, Tenet and Brewin Dolphin are also seen as significant players and Tilney is growing too as is Intrinsic.
Plimsoll has also highlighted firms which it says are the best takeover targets. Its analysis found 233 firms rated as ‘highly attractive targets’ with 1,469 ‘worth considering,’ suggesting that while some firms may be in trouble, many advice firms are seen as valuable acquisitions.