Profile: The reinvention of Succession

Former cover stars Mark Rogers and Mark Stokes tell William Robins Succession Wealth can adhere to ‘new model’ principles while achieving even greater scale

Meeting Succession’s group communications director Mark Stokes and wealth planner Mark Rogers in its Birmingham office is a reunion of sorts. Both were New Model Adviser® cover stars in the past before their firms were acquired by Succession.  

Interestingly both spoke about their own acquisitions and the problems they had with them. ‘It was a good start but hard work as they weren’t particularly happy clients,’ said Rogers in his 2010 profile about the general insurance business he bought with fellow Clay Rogers director Tim Clay.

Stokes was also candid about his missteps as managing director of Maidenhead-based Lewis Chambers when we spoke to him in 2011. ‘We should have done more looking behind the scenes,’ he said about the firm’s acquisition of Sunninghill Group in Farnham. ‘If you buy something with one plan, make sure you have a plan B or plan C.’

So what was it like for the pair being on the other side of the acquisition process with Succession?

Rogers has no complaints about the way the takeover has unfolded. His firm recently completed its three-year earn-out period following Succession’s takeover in 2016. This means the name Clay Rogers has disappeared from above the door of the firm’s Birmingham office, but it has also changed the way the business is run. 

‘Clay Rogers turned over an awful lot of money, but we weren’t that profitable,’ says Rogers. ‘At the end of that rollout, we are five or six times more profitable.’

For Stokes, the experience was a little bit more complicated. Lewis Chambers was acquired just days before Succession founder and chief executive Simon Chamberlain suddenly died in March 2017.

‘We had a terrible period,’ says Stokes. ‘We came into the firm and Simon passed away. But the board, under the control of James Stevenson, has done a pretty good job of making sure the firms that were acquired were kept informed of the direction of travel.’

Meeting Succession’s group communications director Mark Stokes and wealth planner Mark Rogers in its Birmingham office is a reunion of sorts. Both were New Model Adviser® cover stars in the past before their firms were acquired by Succession.  

Interestingly both spoke about their own acquisitions and the problems they had with them. ‘It was a good start but hard work as they weren’t particularly happy clients,’ said Rogers in his 2010 profile about the general insurance business he bought with fellow Clay Rogers director Tim Clay.

Stokes was also candid about his missteps as managing director of Maidenhead-based Lewis Chambers when we spoke to him in 2011. ‘We should have done more looking behind the scenes,’ he said about the firm’s acquisition of Sunninghill Group in Farnham. ‘If you buy something with one plan, make sure you have a plan B or plan C.’

So what was it like for the pair being on the other side of the acquisition process with Succession?

Rogers has no complaints about the way the takeover has unfolded. His firm recently completed its three-year earn-out period following Succession’s takeover in 2016. This means the name Clay Rogers has disappeared from above the door of the firm’s Birmingham office, but it has also changed the way the business is run. 

‘Clay Rogers turned over an awful lot of money, but we weren’t that profitable,’ says Rogers. ‘At the end of that rollout, we are five or six times more profitable.’

For Stokes, the experience was a little bit more complicated. Lewis Chambers was acquired just days before Succession founder and chief executive Simon Chamberlain suddenly died in March 2017.

‘We had a terrible period,’ says Stokes. ‘We came into the firm and Simon passed away. But the board, under the control of James Stevenson, has done a pretty good job of making sure the firms that were acquired were kept informed of the direction of travel.’

Cash injection

Chamberlain was clearly an important figure for Succession. He set out a vision for the company to acquire 50 firms by the end of 2017, accumulate £7 billion of assets for the platform business and float or sell by the end of 2018.

Two years after his death, the firm is on track to pass £10 billion of assets by the end of 2019, is acquiring its 50th firm this year and evidently has not floated or been sold.

‘Simon found it very easy to lay down some milestones for you guys [the trade press and others] to follow and he did a bloody brilliant job,’ says Stokes, ‘but we’re beyond that £7 billion.’

Stokes argues Succession is ‘thriving’ now and is not on the lookout for some kind of immediate exit. What gives Stokes some confidence speaking about the long term is the fact Succession has just received a fresh ‘war chest’ from its private equity backers.

‘We’ve recently secured a funding line of £109 million in association with Inflexion and Ares Capital,’ reveals Stokes. ‘We certainly will be buying more firms because this is one of the principle reasons for us raising further funds. However, we are only going to buy the right firms.

‘There are many businesses that want to sell right now, but we will continue to be selective. We have set ourselves an ambition to get to £10 billion assets under management with organic growth and acquisitions both playing their part.’

Model of success

What is the ‘right firm’ for Succession? Stokes said the sort of business it was looking for range from £150 million to £200 million to larger firms with assets in excess of £1 billion.

But he is also keen to stress acquisition targets have to fit the consolidator’s idea of what a good advice business should look like.

‘What are we buying it for? Is it scale? Are we just bolting on some additional profit? I think [in the early days there was the reverse consolidation model, then there was the fast-track [acquisition] for certain types of firm. Now each deal is genuinely assessed on its own merits.’

Clay Rogers is a good case study of what Succession looks for. Rogers chose Succession’s reverse consolidation model because it offered support to implement financial planning processes before selling.

‘I bought into the system because Simon Chamberlain attended the Institute of Financial Planning [IFP] Conference in 2009,’ says Rogers.

When Clay Rogers started to align itself to the IFP method it still ‘had eight planners doing things in eight entirely different ways,’ Rogers explains. ‘Getting eight planners controlling £500 million doing it the same way, IFP-aligned, was the very reason I took the decision to come over to Succession.’

Rogers has continued along his financial planning path, and was recently appointed president of the Chartered Institute for Securities & Investment (CISI) Birmingham committee. (The CISI took over the IFP in 2015.)

The six steps of financial planning set down by the IFP ‘is the only way,’ says Rogers. ‘2,000 decent financial planners got together in the IFP and collectively decided the best way of dealing with stuff was the six steps. 

‘So, when I knew Succession was pretty much aligned to that, it was a no-brainer.’

Succession has not totally aligned with the IFP or CISI process: it shortened the six-step process to five steps ‘and trademarked it because one assumes there was some value perceived in doing that at the time,’ says Stokes. Under the recent rebrand, though, the ‘look and feel’ of Succession’s financial planning process ‘brings it more in line with the IFP’s steps’.

‘The plan now is to go back to linking it to what we think 2,000-plus financial planners are doing very successfully across the UK and make sure we follow the CISI process more closely,’ Stokes adds.

Clients, not commodities

It is easy to be cynical about Succession’s ability to be both a large consolidator and a true financial planning firm. Few, if any, firms have really managed to replicate the traditional IFP model on a scale as large as Succession.

But Stokes points out Succession has managed to keep a lot of the financial planners who have joined the firm happy, in sharp contrast with some of its rivals.

Since Chamberlain’s passing, he says, chief executive James Stevenson ‘has done a pretty good job of making sure the firms that were acquired were kept informed of the direction of travel. There was a keynote presentation at the end of last year about putting trust back into the hands of the entrepreneurs within the business’.

Consolidators, says Stokes, have ‘lost so many of the principals and the planners they acquired. They’ve held on to a number of the clients, but only in the short-term is my view.’

And of course, when advisers leave, there is a question whether the clients will stick around too, non-dealing clauses notwithstanding.

‘The clients will find them. I often say to James [Stevenson] when we’re chatting: “yes, we look after 20,000 clients but, in reality, we might have 170 clients who control 20,000 relationships” and I think Succession understands that. It’s very core. You can’t buy clients. They’re not commodities to be traded.’

Not all Succession advisers are financial planners though. It has advisers who do ‘transactional business’ such as equity release and mortgages. ‘We’re also big enough and honest enough to accept we have 170 financial advisers and there will be a core in there that would already be very, very good financial planners,’ Stokes says.

Additional services

There is also the question of the investment proposition. In December 2017 New Model Adviser® revealed that in 2015 and 2016 Succession Group recorded £750,000 a year income labelled as ‘advertising and marketing services’.

In 2017 Succession had 17 strategic partners with which it had advertising contracts. Access ranged from adverts on internal websites to events offering continuing professional development.

However, according to its latest accounts ‘a decision has been taken to cease all advertising and marketing services’ and no income was received after 2017, when the company received £165,000 from these sources. ‘It was a strategic decision made within the business, which, in part, was clearly based on our interpretation of the rules post the introduction of Mifid II,’ Stokes says.

Succession Wealth’s website talks about offering clients an ‘investment matrix’ and lists a number of providers including asset managers and discretionary fund managers.

‘We have an investment committee within Succession Advisory Services that works with a group of firms we believe cover all of the main aspects of what we need to marry up to our clients and our investment platform,’ says Stokes. Succession Advisory Services is the platform business with the company, and it will soon be rebranded as Succession Investment Services.

Platform progress

Succession Wealth, meanwhile, is home to a product suitability committee and investment group ‘that look at what [platform and investment director] Simon Taylor and his team at Succession Advisory Services produce.’ But IFAs are able to diverge from that.

‘We talk about our investment matrix rather than a panel because those are the people we work with regularly,’ says Stokes. ‘They’re the ones that put training material out there and make themselves available to talk to the planners on a regular basis if we need them to.’

Stokes says Succession wants its planners to ‘have done due diligence on all of the firms for all of the types of investment a client might want across as small a number as we can possibly manage. At the moment, we’ve got it down to 13. No money changing hands.’

The platform is white-labelled from IFDL, better known to advisers as Ascentric. It has recently replatformed to Bravura, which has caused problems for Succession. ‘We’re not going to fib, that’s not been as easy as anybody would have hoped, but we’re not alone there,’ Stokes says.

Succession has £4 billion of its nearly £8 million-to-£10 billion client assets on its own platform, ‘which is healthy because it demonstrates there must be another £4 billion with other platforms,’ says Stokes taking it as ‘testament’ of Succession’s independence.

‘We have a proposition which, for the perfect original Succession target client, that platform and our investment matrix would suit,’ says Stokes. ‘The minute we moved into the space where we were buying firms like my own, that had been around for 20 years and had £185 million to £200 million on the Standard Life platform, it was pretty obvious we weren’t going to spend two years moving clients from one platform to another platform.’

It means Succession firms together use around ‘a dozen or so’ platforms, ‘and we will continue to work within the rules and clients’ best interest to reduce that if we can’.

What are the advantages of using Succession’s own platform, then? Has Succession been able to drive costs down?

‘It’s got some scale, it’s good value,’ adds Stokes. ‘It’s not cheaper. We think it represents great security for our clients. It’s legitimately owned by Succession Advisory Services and it dovetails very well with the 13 investment partners we have on our matrix.’ He says, however, that ‘if the Succession platform is not suitable for a client, for whatever reason, it doesn’t get used’.

Share issue

Succession has also been criticised by some for the way it has structured advice acquisitions. In 2016 New Model Adviser® looked closely at the consolidator’s acquisition offer.

Firms joining received shares as part of the acquisition deal, as well as cash. We asked how those ‘B’ shares would be valued when the company makes its exit.

As new firms joined, it raised questions: how are shares given to new firms valued? How was Succession ensuring shares held by existing advisers were not diluted?

We did not get many answers at the time, although, as experts pointed out, any deal that offers equity in an unquoted business carries risk for the seller and careful due diligence would be required.

‘I think it’s fair to say most of the acquisitions that we’re likely to make in the future will be a mix of cash and deferred cash consideration and less of that being shares,’ says Stokes.

‘I guess the closer we get to capitalisation, the less upside there is to be gained from taking B-shares and the price they’re worth today. So the natural evolution of the business means it’s more likely to be cash and a deferred cash consideration.’

What does this mean for the people who already have shares in Succession? ‘We’re not listed and we’re not likely to be looking at any listing,’ Stokes says.

For Rogers receiving shares was as much about building a good culture within the firm as it was about any kind of reward. ‘All I would say is the shares are important to me, to be the John Lewis of financial services,’ says Rogers. ‘Everyone participates in the shares therefore everyone participates in the growth.’

Critics’ eyes might roll at the mention of being a ‘financial services John Lewis’. But the fact many of the original firms who sold to Succession still have shares shows there is unity among many of the core businesses that make up the national advice company.

‘That’s the reason I did that deal and that’s why the shares are important to me. Everyone concentrates on profit and client service and everyone gets rewarded for it,’ Rogers says.

Rising force

Changes implemented by the company in the past few years show Succession is aware it needs to improve some aspects of the business, particularly if it wants to be a force in the financial planning world.

Perhaps this is best demonstrated by a graduate programme set up in 2018, which attracted 10 people last year. As Rogers says: ‘we are competing with the other professions aren’t we?’ And the only way to be seen as a viable alternative to those is to offer ‘a completely clear career path’.

‘We’ve got to be in a position where we can say: why don’t you come into something where you can still make a very, very decent career out of it and you’re going to be right in at the creation and firmament of a proper financial planning profession? I personally think that is far more exciting.’

Doubters will still need to be won over if Succession is to keep going and get bigger. But the fact Rogers and Stokes are clearly enthusiastic about the possibility of building a business that follows the principles of financial planning, while aiming for scale, shows Succession should not be dismissed out of hand.

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