London-based financial advisory firm LEBC is set to be sorely impacted by the closure of its defined benefit (DB) pension transfer advice business in September.
Financial services intermediary company BP Marsh & Partners, which holds a 59.3% share in the firm, said in its results that the DB transfer market represented around 20% of LEBC’s revenue for the current year.
This resulted in a lower valuation of BP Marsh’s equity of LEBC to £23.9m ($30.6m, €27.7m).
“However, LEBC, excluding DB transfer business, is still expected to produce annual revenue of [around] £19m alongside an acceptable underlying profit position,” the intermediary firm said.
Still have faith
But BP Marsh intends to support the financial advisory business, as LEBC has just undergone a “significant restructuring and is working on a number of initiatives, including its bionic advice offering”.
“The group [BP Marsh & Partners] will work closely with LEBC’s management team to return LEBC to the position it was in before the withdrawal from the DB market, and have recently assisted in the recruitment of a new chairman to the holding company board.
“Since the company invested in LEBC in April 2007, the current valuation represents a 1.9x money multiple.”
Recurring trend
Many firms have incurred in difficulties because of choosing to either keep offering DB transfer advice or dropping it altogether.
Those, like LEBC, that dropped this arm of the business have suffered losses in revenue.
But the firms which have kept providing advice on this area have been hit by skyrocketing professional indemnity (PI) insurance premiums.
This is because of the very high risk associated with DB pension transfers and, according to a Financial Conduct Authority (FCA) assessment, in worst-case scenarios advice companies’ PI premiums could go up by 200% to 500%.
