Yes, it’s true. When the TCWU travelled across town for an extracurricular horizontal dalliance with another Update, it was on the basis of assuming that following my father’s advice of ‘do what I say not what I do’ was applicable to public health, and also because, y’know, it had been a while and we’re all human, amirite? Amirite? Eh guys? Yoooouuuu know what I’m talking about. Anyway, mission accomplished, twice, and now I don’t have to go to any of those boring SAGE meetings any more, so it’s trebles all round.
I swear if Armando Ianucci did these storylines in The Thick Of It they’d be rejected for being too fanciful.
Anyway, hey ho and here we go for the next round. In a contrast to last week’s downbeat effort – and thank you to those of you who said nice things about it – this week I thought we’d go all red in tooth and claw and have a wee think about private equity’s involvement in this business we call show.
(Incidentally, I’m told there’s a magnificent PE monster in the new series of Billions; that’s surely a must watch).
Most of you will know that PE – and I mean private equity as opposed to Public Enemy – has a bit of a reputation for being very much not fluffy. The job on is to find a business, turn it into something that’s worth lots more than it was originally, and sell it again. Ideally in three years. Some PE houses have a more nuanced view, but it is what it is. You don’t tangle with PE unless you’re up for the ride.
Our sector doesn’t really lend itself to short term pump-and-dump (no, not that like, Dr Ferguson) strategies, particularly when it comes to adviser firms. Aggressive moves to streamline businesses by changing remuneration packages, or by turning independent firms into tightly restricted ones, have suffered from the relative ease with which good advisers, admins and paraplanners can find new jobs elsewhere. It’s one thing to buy the business; it’s another to remodel it into something someone else will value at five times what you bought for it. So PE has resembled patient capital much more than I suspect it is really comfortable with.
The reason for banging on about this is that I’ve had a couple of calls with folk this week who have talked about the ongoing appetite of PE for this sector – even when you might think that the Current Unpleasantness would have damped it down. And when you think about it, that makes sense.
One of the inhibitors of PE making Big Changes to the businesses it owns has perhaps been lifted by the pandemic. My little theory – might be rubbish, might not – is that PE will be emboldened to make those changes as the sector slowly dusts itself off. We’ve seen that demand for advice is incredibly resilient; that has nothing to do with whether products underneath are vertically integrated or not. We’ve seen that platforms have enjoyed better than expected persistency through the first weeks of the pandemic; that has nothing to do with whether the operating model is on this tech or that tech.
So a wee prediction from me is that as we step back into the light, we’ll see PE snapping up more firms, and being much more aggressive in making more fundamental changes in the businesses they own. The concerns about not quite getting big change pitch-perfect, or of losing people, might be a little less pronounced. Things could start to move rather more quickly.
Somewhere in a boss-tier Kensington apartment, that noise you can hear is a PE guy cracking his knuckles and getting to work. This capital was never patient; it just needed the right moment.
HARDER THAN YOU LINK
- A very, very last call for admins, paraplanners and advisers to rate your platforms this quarter. The survey closes tonight, no funny business. Takes 4 minutes; all anonymous.
- We’ve got McPhail! The real Tom McPhail! Locked in a basement, and he can’t escape until he’s done HomeGames this week on transfers, including his own right out of the industry. Will be a good one; watch it here at 12.30.
- End of an era as ZIP (the Zurich Intermediary Platform and one of my favourite TLAs of all time) becomes Advance by Embark, which sounds a bit like a move in a WWII strategy game, but ok. I’m looking forward to seeing what Embark makes of its new acquisition; I’ve always thought ZIP was a barnstormer of a platform functionality-wise, but suffered from its parentage.
- Intelliflo has the first third-party DFM offering for its iMPS service, from Sparrows Capital. Not a household name but a good bunch, and a very interesting development. Fixed fee DFM, you say? Oooh!
- And your music choice this week will come as no surprise if you’ve been paying attention. With all this talk of PE, we can’t possibly do better than the joyful Harder Than You Think from Public Enemy. You don’t stand for something, you’ll fall for anything…
See you next week. Now get up.