Based in Plymouth, Shore Financial Planning was founded by Jon and Alison Treharne and will be responsible for the Cornwall and Devon regions.

Meanwhile, Define Wealth is based in Reigate, Surrey. Atomos said it expects the two businesses to be integrated by the end of Q1 2024.

To read more on this topic, visit: UK wealth manager makes two acquisitions

The firm said the acquisition was part of its growth strategy to expand its geographical footprint. It adds to the 15 offices throughout the UK.

Christopher Kraft, Atomos chief commercial officer, said: “We are delighted to welcome the highly experienced teams at Shore Financial Planning and Define Wealth into the Atomos fold. We see strong alignment in our philosophies and ways of working which make the businesses a good fit. This is an exciting time for Atomos as we scale up and grow.”

Atomos, formerly part of Sanlam Wealth, currently manages £7bn assets.

The term ‘shoehorning’ will ring bells with followers of regulation, who will recall the FCA’s keen focus on it in the Retail Distribution Review (RDR) of 2012.

Back then, the concern was that as advice and investment firms developed centralised investment propositions (CIPs), there would be issues around client suitability and poor outcomes.

There were concerns that firms could ‘churn’ clients, moving them from their existing investments into CIPs, and that additional costs could be incurred by clients being put into these new investments.

Now, with barely a month going by without at least one wealth manager or advice firm being snapped up by an aggregator or consolidator, there’s a real likelihood that the regulator could turn its spotlight onto these expanding firms.

Renewed focus

Under Consumer Duty rules, shoehorning will now be viewed with even more disdain than in the past by a regulator looking to make sure it’s on the front foot.

Back in February, St James’s Place – probably the largest vertically integrated advice firm in the UK – stated that ahead of Consumer Duty coming into force, there would be “aspects of the way we operate which will need to change in order to meet regulatory expectations”.

The firm added that the FCA was “expecting action, and where we identify this is required, we will respond to improve [the] client experience and reduce any risk of poor client outcomes”.

In recent days, SJP has announced a fundamental overhaul of pricing, and is now looking to increase the role of passives in its proposition.

Even the biggest firms will need to ensure that they can demonstrate that they have not shoehorned any clients.

Evidencing this is the case becomes much more difficult in a vertically integrated organisation growing rapidly via M&A.

Acquisition frenzy

Recent data from research firm NextWealth found that acquisitions of advice firms almost doubled in 2022.

Last year saw 101 deals, nearly twice the 54 inked in 2021. Interestingly, the deals in 2022 accounted for £48bn in assets under management (AUM), up by 85% from the £26bn the prior year.

Perspective Financial Group and Fairstone Group made the most acquisitions, with 20 and 13 purchases, respectively, followed by Kingswood (9), Atomos (formerly Sanlam) (8), and Progeny (7).

With this kind of growth within some firms, it will be vital that these businesses ensure clients are not shoehorned into products amid the frenzy of expansion.

And where owners or majority shareholders are private equity firms, businesses need to ensure that their owners’ laser-like focus on profit doesn’t detract from client suitability efforts.

Strategic decisions

Among the many factors and processes that may need to be addressed to help reduce the risk of shoehorning, wealth managers may want to consider cost.

Outsourcing a centralized investment proposition benefits from economies of scale, particularly when the ‘agent as client’ approach, which is covered in the FCA Handbook (COBS), is used.

Such an approach means that a firm doesn’t have to fund expensive back-office functions, like custody and trading desks. At the same time it facilitates a genuine whole-of-market approach.

The more competitive a firm’s overall fees are, the less chance it can be viewed as not offering its clients value for money.

This doesn’t mean there has to be a race to the bottom – the prevailing rhetoric is keen to emphasise value over price – but ensuring that its proposition is keenly priced could act as a robust part of a firm’s defences when it comes to demonstrating its approach.

Attractive pricing and operational independence aren’t necessarily a panacea, though; the regulator will be looking for comprehensive evidence that shoehorning isn’t occurring, not some quick fixes that only pay lip service .

This article was written for International Adviser by David Ogden, head of compliance at Sparrows Capital.

The deal, which has boosted Alquity’s assets under management and administration (AUMA) to over US$640m (£526.9m,€603.8m), will mean advisers can continue to access existing funds on the platform and fund managers Driehaus Capital Management, atomos/WTW (formerly Willis Towers Watson) and Foresight, alongside Alquity’s ESG and impact vehicles.

The first addition to the platform will be Alquity’s Indian Subcontinent fund.

VAM Funds’ platform is currently used by 400 international IFAs.

The companies will remain as separate brands and operate independently as back office functions are built over time.

Paul Robinson founder and executive chairman of Alquity, said: “This strategic acquisition creates a fast growing, high-quality international investment management platform that offers the best of the best investment access for advisers alongside award-winning service.

“This deal creates a new scaled company enabling us to accelerate our fund growth, attract more institutional investments, and broaden the quality offering to clients.

“As well as expanding VAM Funds’ successful international multi-asset IFA business, over time we will also offer Alquity’s high-quality ESG and impact funds, tapping into the increasing demand for sustainable investment products.”

The private bank has hired Anna Zakrzewski as group chief operating officer.

Zakrzewski served over two decades at Boston Consulting Group (BCG) as managing director and partner. He will be based in Luxembourg and will work closely with Eli Leenaars, outgoing chief operating officer for Quintet.

Leenaars is retiring after four decades in executive roles for four different banks.

The Chartered Institute for Securities & Investment (CISI)

The professional body has appointed Mandy Gill as its executive director of global learning.

Gill will join the CISI in late November from the Gambling Commission where she was director of industry and specialist knowledge. Prior to that she was director of compliance at Commission from 2018 to 2023.

Gill has experience in vocational education and regulation, working with Ofqual for three years, and professional services. She became a qualified solicitor in 1993 and worked at Manchester Metropolitan University.

Nucleus Financial Platforms

The platform company has hired Andrew Tully as technical services director.

Tully is a pensions expert and industry commentator. He has spent 35 years working in high profile roles, such as technical director at Canada Life and Pensions Technical Director at MGM Advantage.

He will be taking over Neil MacGillivray, who is retiring as head of the technical support unit after a 25-year career with James Hay and Nucleus.

Robeco

The international asset management company has named Nick King as head of its ETF platform.

King previously spent eight years at Fidelity. Before that, he spent nearly nine years at BlackRock where he was promoted to senior portfolio manager in ETFs.

WRISE Group

The multi-family office has hired Helen Lam as group chief operating officer and Gaven Koh as group head of risk and compliance.

Prior to joining WRISE, Lam worked at the Bank of Singapore Hong Kong branch on strategic business operations.

Koh has 12 years of experience in the private banking industry and led a team of analysists at Credit Suisse AG across Asia Pacific.

Atomos

The wealth firm has appointed Jonty Warneken as head of the Harrogate office.

Warneken previously worked at Sanlam for seven years until 2019, when he joined Brooks Macdonald.

Canaccord Genuity Wealth Management (CGWM)

The wealth management firm has recruited David Blake as experienced investment director.

He joins as investment director for Rathbones and has previously held roles at Jupiter Asset Management, Bestinvest and Brooks Macdonald Asset Management.

Fidelity International 

The investment firm has named Talib Sheikh as lead portfolio manager across multi-asset income strategies.

Sheikh brings over 25 years of experience in the investment industry, most recently as head of multi-asset strategies at Jupiter Asset Management.

Sheikh succeeds Eugene Philalithis, who has announced his retirement in 2024.

There has even been growing interest in comic books and collectible cards with world renowned US rapper Post Malone paying $2m (£1.6m, €1.9m) for a rare one-of-a-kind card for the fantasy game ‘Magic: The Gathering’.

More notably in the UK, rising interest rates and market fluctuations are affecting many traditional asset classes which is paving the way for more people to seek out alternative assets to reach their investment goals.

Alternative assets can provide many positives to the investor such as advantageous tax positions and portfolio diversification but they also provides investors with something that traditional assets don’t – fun!

They can provide excitement and enjoyment to investors that comes with owning a tangible asset they can see and use.

However, these types of assets, as like any others, comes with its own risks which must be assessed before investors incorporate them into their financial plans.

Hedging against market volatility

Richard Bacon, head of business development at Shard Capital, said that passion assets are undergoing a transformation.

He said: “In the last two years there has been a tangible increase in how accessible and democratized these assets have become. They are becoming mainstream we haven’t seen before. The more we understand the headwinds we are facing in traditional asset classes given the current economic backdrop, the more important it is that we broaden our investment universe and look for alternative assets.”

As markets become more volatile, clients are turning to passion assets to safeguard their wealth.

Naomi Wharam-Adatia, private client director at GSB Private, commented: “These unconventional holdings provide a hedge against market volatility and inflation; typically maintaining value during economic downturns unlike traditional assets such as stocks and bonds.”

They can also provide investors with much higher returns outside of their traditional portfolios.

Wharam-Adatia provides the example of the price increase for Hermes bags which can fetch investors returns of up to 30% or more.

Rob Harrison, head of research at Progeny Asset Management, added: “These assets can deliver strong returns for the less risk averse investor and can be uncorrelated to what is gong on in stock markets and the wider economy so can be useful diversifiers for this reason.”

Advantageous tax position

Passion assets also have the added attraction of having an advantageous tax position.

HM Revenue & Customs (HMRC) views many of these assets as ‘chattels’ which is property that is tangible and moveable and gives investors a £6,000 ($7,500, €7,000) tax free exemption.

Henry Lowe, partner in the private client team at Mercer & Hole, said: “HMRC is alive to the fact that the value of some collections is in their entirety rather than individual elements. If being sold from one person to another, HMRC may consider them a set and value them as one asset accordingly.

“For example, a case of wine, of the same vintage or from the same producer, would be considered a set and valued as a case rather than by the bottle.”

Some passion assets are also viewed by HMRC as ‘wasting assets’ which have a life of less than 50 years.

“Wasting assets, irrespective of their value when sold, are free from capital gains tax, except where the asset has been used in your business,” added Lowe.

Risk

Scott Atkinson, managing director at PFM Financial Planners, part of the Loyal North Group, highlighted that while there is nothing wrong with an investor indulging in their passions, these assets still carry a risk.

He said: “Using these types of assets as a basis of investment and financial planning is highly risky and completely unpredictable.”

There are certain obstacles that come with investing in alternative assets such as issues of liquidity and a lack of a centralised market.

Ed Read-Cutting, director at The Fry Group Belgium, said: “A significant challenge with passion assets lies in a potentially illiquid secondary market. Unlike more conventional investments, selling passion assets can be intricate and uncertain.

“Their value is often influenced by sentiment and demand, leading to potential price volatility and unpredictability when the time comes to sell.”

Lee Anderson, wealth planning director at the Atomos Preston office, also pointed out that the cons of passion asset investment can also include “high transaction costs, storage and maintenance expenses and the need for expertise to navigate the market effectively”.

Therefore, while investing in alternative assets can have many pros, it is important that investors are aware of the cons before investing.

This comes down to advisers and wealth managers to present the full picture to their clients and provide their professional opinion to help investors get the most out of their money as well as enjoying the process of investing in something they have a passion for.

GSB’s Wharam-Adatia added: “The intricacies of valuing, acquiring and maintaining such assets requires specialist knowledge and investors would be prudent to collaborate with trusted advisors who understand the market and can perform strict due diligence on their behalf, helping them to make informed decisions.”

Emotive experience

While there are valid arguments that passion asset investments should not be the foundation of an investors portfolio sitting alongside conventional investments, it can allow investors to have an emotive experience.

Jennifer Toon-Davenport, membership and acquisition director of Lawsons Networks, said: “If someone really is interested in something, be it wine or watches or luxury fashion, then that surely is the best way to become an expert investor in whatever it is. And the more expert they are, the more money they are likely to make.”

Passion assets don’t only produce a financial return but also an emotional return that investors may not be able to get from traditional assets such as stocks and bonds.

They allow investors to put a personal touch on their investment portfolios and diversify it with things they have an interest in and value.

Charles Gillespie, wealth planner at Kingswood Group, uses himself as a case in point.

He said: “Personally, along with a small collection of art in recent years, I have invested in a portfolio of high grade first edition vintage comics as not only are they lovely to own and something of interest to me but also I believe that the long-term growth potential is excellent.”

Time will tell how popular investing in passion invests will become as markets continue to react to rising interest rates, and how that will impact various markets, but Gillespie points out that assets which are scarce will always be in demand.

Passion assets are gaining traction in the investment landscape and are a point of debate within the industry.

However, what is important is for those working in the industry to do their due diligence and help clients to not only receive financial gain from investments but also to gain emotional fulfilment which can be achieved by investing in passion assets, making sure they slot into a traditional portfolio while also safeguarding their clients financial future.