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Editor’s Column: Private equity – friend or foe?

 

It was, to some degree, inevitable that private equity firms would turn their attention to UK Financial Planner firms.

I’ve been watching the growth of private equity ownership in the UK for many years. Few members of the public realise that huge swathes of the British economy are now owned by private equity, from major retailers to giant insurance companies.

Financial Planners are savvier than the average person and understand that private equity is the big new player in the Financial Planning sector and it will change the landscape.

They also understand how it works. Private equity is looking to sweat assets and drive substantial returns.

The growing role of private equity in Financial Planning was brought home this week by the game-changing takeover of fast-growing Financial Planner and wealth manager AFH by US private equity firm Flexpoint Ford for £224.5m.

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The all-cash offer underlines just how valuable the UK Financial Planning sector is seen. At a time of pandemic when many sectors are in turmoil, the UK Financial Planning and wealth management sector offers growth, potential, robust income streams and an increasingly tech-driven approach. What’s not to like?

Yet it seems readers are more than a little suspicious.

We conducted a straw poll on Twitter this week and so far (the poll is still open as I write) fewer than 10% of those surveyed see private equity as a good thing in Financial Planning with nearly 57% seeing it as a bad thing. Most of the rest are undecided.

Only a modest number of people have taken part so it’s not a conclusive result but it does highlight that private equity has a lot to do to convince planners of its intentions.

It’s also an area where the regulator has made little comment. That may change.

Private equity is not the evil empire some may see it as – in many ways the new capital it brings is just what’s needed – but its impact on every aspect of Financial Planning will be felt and that requires the regulator to sit up and take notice.

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Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience.  This topical comment on the Financial Planning news appears most weeks. Follow @FPT_Kevin 

 

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