RDR blamed for Lighthouse decision to go private
The Lighthouse Group, the UK’s largest autonomous IFA and wealth management group, has announced its intention to de-list from the Alternative Investment Market on the London Stock Exchange, citing uncertainty over the impact of the upcoming RDR reforms and other regulatory developments.
The group will be seeking approval from shareholders on 31 July for the cancellation of admission of its ordinary shares for trading on AIM. The group is the last remaining IFA listed on AIM, after the others all delisted.
RDR, the UK’s Retail Distribution Review, which will end commission payments for financial advice, is of increasing concern to wealth managers and financial advisers in the rest of Europe. Germany is also looking to make similar changes and ESMA, the European regulator, will introduce reforms in due course. RDR is due to be implemented in the UK by next year.
David Hickey, Lighthouse chairman (pictured), said: “For some time the conventional advantages of being listed on AIM have not applied to the company.” Since the group listed on AIM in 2000, the market conditions for listed IFAs have worsened: “The scale of the structural, regulatory and trading challenges now facing the IFA industry [in the UK] makes it extremely difficult to forecast the trading outlook for the next few years.”
The Board pointed to the collapse of its share price since it listed in March 2001 from 60p to 4.88p per share as evidence that IFA businesses are not viewed positively in the investment community. A low share price makes fundraising, the main reason for being listed, difficult.
“In addition, many IFA businesses, including Lighthouse, are undergoing very significant restructurings of their processes and operations, in order to be able to trade post the RDR. Against this background it is very difficult to indicate reliably to the investment community what future terms of trade will prevail within the sector, and hence virtually impossible to construct reliable valuation matrices.”
However, Hickey added: “Despite the changes in the industry and uncertainty that these bring, Lighthouse is in a robust position both financially and operationally, and the board remains optimistic about the long-term prospects for the company.”
Paul Mumford, Senior Investment Manager at Cavendish Asset Management and owner of Lighthouse Group shares as part of his AIM Fund, is not convinced. He said: “The Lighthouse Group management clearly thinks that there might not be much of a future for the company once the RDR reforms come into effect. Whether this fear is justified or not, the manner in which they are going about de-listing for AIM is poor to say the least, and will disproportionately hurt the majority of shareholders in order to benefit the few.