This collaboration combines Fairstone’s extensive client base and advisory expertise with JP Morgan Asset Management’s global investment capabilities, it said in a statement on 22 January.

The partnership will see Fairstone utilise JP Morgan Asset Management’s global equity and global bond capabilities as core components of its new NOVA MPS (Managed Portfolio Service) range.

The NOVA MPS will provide institutional-grade investment capabilities to retail clients at institutional pricing, “delivering significant value at just 55 basis points”. Set to launch for new clients on 1 March, the range is designed to deliver proven investment solutions at a highly competitive price.

Fairstone will seed the new range with over £500m on day one and anticipates that the exceptional quality and price of the offering will drive incremental assets into the Fairstone MPS ranges of £2bn over the next 12 months.

The strategic partnership extends beyond the NOVA MPS range, as Fairstone and J.P. Morgan Asset Management collaborate to develop further product innovations.

Pictured above are: Lee Hartley, Fairstone CEO; Claude Kurzo, JP Morgan Asset Management Country Head UK; and Nick Stebbing, Fairstone COO.

Speaking at the launch event, held at JP Morgan’s offices on London’s Embankment, Lee Hartley, CEO of Fairstone, said: “Fairstone Investment Management was established to act as professional buyers of investment solutions, ensuring clients remain at the heart of our approach.

“The NOVA range, managed by Fairstone’s in-house investment management team, will feature segregated mandates run by J.P. Morgan Asset Management as cornerstone solutions. J.P. Morgan Asset Management was selected for their outstanding track record, with 88% of their global mutual fund assets under management outperforming their peers, and for the expertise of their team of over 1,300 global investment professionals.

“To remain the most trusted wealth management company and to continue delivering exceptional service to our 125,000 clients, we recognise the importance of partnering with leading suppliers. In J.P. Morgan Asset Management, we are confident we have found the right partner.”

Claude Kurzo, UK country head at JP Morgan Asset Management, added: “We’re excited to partner with Fairstone on launching an innovative new MPS solution that is expected to provide strong client outcomes at a very attractive price point. We also look forward to supporting Fairstone in helping their clients achieve their financial objectives, which includes leveraging our Guide to the Markets and training programs to support Fairstone’s advisers.”

Nick Stebbing, chief operating officer at Fairstone, said: “This partnership delivers institutional-grade investing to retail clients, bridging a significant gap in the market. By working with J.P. Morgan Asset Management, we’re able to offer solutions that bring together robust performance and competitive pricing. This collaboration underscores our commitment to ensuring clients benefit from professional-grade strategies that were previously accessible only to large institutions.”

In a statement on 14 January, it said the team ended 2024 with the signing of its 87th partner firm through its market leading Downstream Buy Out (DBO) programme, cementing its position as the most proven acquirer in the wealth management sector.

Fairstone said the DBO programme provides ambitious IFA firms who have no desire to sell in the immediate future, the ability to release capital on day one of partnership and then work towards a full sale at a future date of their choosing. Fairstone provides access to investment, resource, and new clients during the partnership period to ensure that each business reaches its optimal value at the date of full acquisition.

Speaking on the firm’s growth in 2024, and the success of the DBO model, Lee Hartley (pictured), CEO of Fairstone said: “Throughout 2024 we have welcomed some fantastic, growth-orientated firms into Fairstone through the DBO programme. Our mission is to become the most trusted wealth advisory firm in the UK and Ireland, with that in mind, the mutual alignment of company values has been fundamental to each acquisition, and to the success of the DBO programme to date.”

He added: “Over the last decade, every firm that has joined Fairstone through the Downstream Buy Out model has received no less than 100% of their initial sale value, with many having achieved a great deal more. Over the last 2 years the average value received after earn-out has been 120%, with the most successful firm hitting an incredible 180%.”

Due to the success of the model, Fairstone’s M&A team have extended the reach of the programme even further. 2024 saw the launch of the firm’s new Special Purpose Vehicle (SPV) and Start-up Joint Venture (SJV) models.

The former proposition enables entrepreneurial principals who have already taken their businesses through to full acquisition with Fairstone, to start, build and ultimately sell a new business of scale with infrastructure and capital support. At the other end of the spectrum, the SJV proposition enables clusters of independent, self-employed or employed advisers to become business owners in partnership with Fairstone and work together to create a capital event of their own.

Hartley said: “There are so many fantastic, employed advisers out there whose hard work is creating capital value for others. They are rightly nervous about the risk associated with setting out on their own. We take away that risk, allow them to continue to do what they do best, and ultimately benefit from the significant capital value that they create”.

Fairstone’s deal-making pipeline remains strong, with firms managing over £6bn of AUM engaged in advanced discussions.

Speaking on the year ahead, Hartley added: “Our DBO programme will continue to develop as the market leading offering and be at the heart of our acquisitive activity. The success of our business to date, is largely attributable to how attractive the offering is to ambitious IFA and wealth advisory firm owners. I am really looking forward to seeing what we achieve in the year ahead.”

The purchase of Grayside Financial Services in Epsom and Swindon-based Executive Wealth Management add £318m of funds under management and 1,250 new clients.

Over the past 12 months, the Newcastle-based consolidator has made deals with 18 firms joining its Downstream Buy Out (DBO) programme across the UK and Ireland and eight full acquisitions completed.

The firm recently opened its sixth nationwide hub in Farnborough, bringing together a number of Fairstone’s South East offices. Fairstone says this is part of an “evolving strategy” which will see Fairstone open offices in key locations across the UK within the next 12 months.

The strategy will see a move towards more operational functions at the hubs and the establishment of high quality working environments for colleagues located in the regions as well as improved settings for meeting clients.

Fairstone CEO, Lee Hartley said: “We already successfully operate five hubs across the UK, including a thriving City office in central London. In close proximity to Farnborough airport, the Aerospace Centre Business park was the perfect location for our next hub with its business gateway to London.”

He added: “Grayside and Executive Wealth are client-focused, quality firms which have established an excellent reputation for providing first-class service over many decades. They’re a great fit for Fairstone.”

Hartley added: “We’re delighted to welcome the Grayside and Executive Wealth teams into the Fairstone family. Both are client-focused, quality firms which have established an excellent reputation for providing first-class service over many decades. They’re a great fit for Fairstone.”

Executive Wealth principals James Relph and Martin Smedley said they decided to sell to Fairstone as the deal came with both the potential to create further growth and the lure of being part of a larger organisation.

Relph said: “We have grown significantly in the past few years and needed the support and infrastructure of a large national brand to maximise new opportunities and help take the business to the next level.”

Grayside Financial Services principal Mike Seddon added: “The DBO model really appealed to us as it has allowed us to partner with Fairstone first to integrate our processes and then be supported to grow, while remaining independent and continuing to service our client needs to the highest standard.”

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.

Based in New Milton, Bridgend and Chepstow the deal takes the total number of Fairstone offices in Wales to five and adds a fourth to the South West.

Meanwhile, the completion of the purchase of Advanced Financial Services will add two North East-based offices in Newton Aycliffe and Consett, doubling Fairstone’s presence in County Durham.

The combined deals add over £380m of assets under management as well as 17 advisers, 19 support staff and 2,000 clients.

To read more on this, visit: Charles Stanley announces MPS partnership with Fairstone

Both acquisitions were made through the firms Downstream Buy Out (DBO) programme which allowed for a period of integration and a focus on growth before full acquisition.

Leighton Hawkins, co-prinicipal at Station, said: “Fairstone’s unique acquisition proposition was perfect for us as it gave us the time we needed to ease into the sale without compromising any of our stakeholders. By taking the deal slowly and doing it properly, we have managed it with minimum disruption to our colleagues and most importantly, our clients.”

Phillip Bousfield, co-prinicipal of Advanced, added: “As a small firm, we were looking for the strength of a national brand to support us in scaling our business. Fairstone provided a growth framework while enabling us to retain what was most important to us, the personal relationship we have with our clients.

“Joining Fairstone has provided us with the resources we need to ensure that we continue to offer our clients the best possible independent financial advice, both now and in the future.”