Fairstone Group Achieves 32% growth in FUM

Fairstone Group, which incorporates one of the UK’s largest Chartered Financial Planning firms, has seen a 32% increase in funds under management to £10.7bn as shown in its annual results to December 2020.

Financial statements just completed for the 2020 financial year also highlight that recurring income has increased to £49.3m, up from £41.5m in 2019, representing 73% of advisory revenue. Repeating income, which encapsulates all revenues generated from existing clients, stood at 92% of turnover.

Total revenue for the 2020 financial year has also grown by 8%, to £69.7m, representing an increase of £5.3m, with adjusted EBITDA showing a profit of £5.4m which excludes the EBITDA contribution of all firms currently undergoing integration. Current fully embedded EBITDA now stands at £20m.

Meanwhile the number of wealth clients during this period has risen by 18% from just over 34,000 to more than 40,200.

Fairstone is one of the UK’s fastest growing financial services organisations. With a head office in Newcastle and a significant presence in London, the group operate across more than 40 locations throughout the UK.

Fairstone CEO Lee Hartley said: “In 2020, against the backdrop of the global pandemic, we again delivered strong progress across all areas of the business and the group continues to make excellent progress against its core strategy and growth plan.

“From an acquisition perspective, the year was very heavily back-end loaded as the effect of a national lockdown delayed a large amount of our due diligence programme. I’m delighted to say that every single deal we aimed to complete in 2020 was concluded, although naturally these were later than planned. Ultimately this means our profits for the full-year are quite heavily understated when compared to the steady-state performance.

“Building on our robust foundations, we have been able to rely on high levels of recurring income, together with a high degree of new business from existing client relationships. Our client retention rate of 98% provides extraordinary resilience to our trading. The fact that 96% of wealth advisers choose to maintain their careers with Fairstone, even after factoring in planned retirement, shows that we enjoy long-term relationships with our key people both before and after acquisition.

“Revenue has been substantially ahead of the prior year in each channel and both our advisory and fund management businesses are operating profitably and with a complete absence of cross-subsidisation.

“A combination of organic growth and the success of our proprietary Downstream Buy Out (“DBO”) acquisition model, is continuing to deliver exceptional results and to drive growth, with a series of deals with partner firms being completed at various stages within the financial year.”

Fairstone’s unique DBO model is aimed at the owners of successful IFA firms looking to grow and optimise the future sale of their businesses, whilst ensuring their clients and staff are not compromised as a result of the transaction.

The solid performance across the key metrics of the business is further bolstered by Fairstone completing a market-leading transaction with global private equity house TA Associates earlier this year. The deal, which marked a standout milestone in Fairstone’s progression, saw funds advised by TA take a significant stake in the business. The investment formed the central aspect of a triple-boost for Fairstone, with private equity backers Synova also reinvesting into the group and funders Alcentra increasing the scale of the acquisition facilities available to the company.

Mr Hartley added: “Our uncapped long-term capital resources and new shareholders who have a shared long-term outlook, further underpins and accelerates our ambitious acquisition programme.

“Fairstone’s considered approach, together with our proven business model and the significant financial backing that we have at our disposal, allows the management team and shareholders to look forward to 2021 and beyond in a positive manner.

“As we sit today, 10 months on from our last financial year-end, we have already seen run-rate revenues hit £100m when we factor in the impact of our most recently completed deals and FUM has exceeded £13 billion. The momentum we have carried forward into this period is highly impressive and only shows signs of accelerating.”

In addition to 10 completed acquisitions, 10 firms joined the DBO programme in 2020 with a view to full acquisition within the next two years, and interest in the buy-out proposition is higher than ever, with over 45 firms currently in active discussions.