• finnCap recently released detailed research note on Kingswood prospects
• With underlying sector tailwinds across both UK and US markets, company deemed set to achieve outsized returns for investors
• Kingswood now benefits from up to £80m permanent growth capital to create a global, scalable wealth management infrastructure, not just a bolt-on acquisition driven growth model
• IFA market in the UK and the IBD/RIA market in the US provides a significant opportunity to benefit from enduring structural drivers and a sticky asset base
Kingswood Holdings Limited (AIM: KWG), the ambitious integrated international wealth management company, continues to execute on its global growth ambitions in an environment of underlying sector tailwinds across both UK and US markets. The Group’s NOMAD finnCap have completed a comprehensive research note detailing Kingswood’s growth ambitions. For access to the research paper please click here.
In 2019, Kingswood expanded through global consolidation having seen its largest shareholder, KPI (Nominees) Limited, inject new capital to bring its total investment to £15m; and Kingswood now presents a robust, clean and efficient operation which is able to benefit from up to £80m of permanent growth capital in the form of irredeemable convertible preference shares from funds advised by Pollen Street Capital, a global investor with a strong track record in financial services. Kingswood is entering the next phase of development: becoming a global, scalable wealth management infrastructure, not just a bolt-on acquisition driven growth model.
Gary Wilder, Group CEO at Kingswood, said: “2019 has been a year of positive and highly effective transformation. We are incredibly excited for what 2020 will bring. We believe that Kingswood presents investors with a rare opportunity to achieve outsized returns thanks to an institutional grade financial services management team that is positioned to tap into underlying sector tailwinds in the retail wealth management market. We aim to offer best in class, vertically integrated wealth planning and investment management services backed by leading technology, a rigorous risk and compliance environment and innovative product offerings.”
Kingswood provides investors with exposure to the financial advice market while being supported by an acquisitive consolidation play in fragmented UK and US markets. Increased ownership of the integrated advice and investment process allows the company to capture an increased share of revenues generated across the value chain while simultaneously creating future cross-referral opportunities.
finnCap believe that Kingswood’s current share price is significantly undervalued given the upside growth potential that can be delivered in a relatively short time period of between 12-18 months. They see an expanded EBITDA on conservative assumptions leading to an enhanced multiple valuation and share price.
The IFA market in the UK and the IBD/RIA market in the US provide a significant opportunity to benefit from enduring structural drivers and a sticky asset base. While UK IFA consolidation is not new, Kingswood’s group structure allows it to offer generous potential upside opportunities to IFA principals aiming to sell their business. As a consequence, Kingswood provides large potential growth opportunities for IFAs in their mid-50s as opposed to the more widely implemented ‘bolt-on’ model where acquired IFAs (often mid-60s) are forced to integrate into a large corporate-style culture. The firm aims to implement a ‘hub’ model, similar to the UK, where regional offices drive returns from local networks, identifying deals and deepening relationships.
Patrick Goulding, Group CFO and CEO of Kingswood’s operating platforms, commented: “We’ve developed a strong competitive advantage as a result of our integrated offering. The growth capital has enriched the firm with the ability to capitalise on the consolidation opportunities available in the global wealth management market. We have a very strong and experienced management team in the UK and US to take advantage of the opportunities in both markets.
“Buying power over the decades has moved from retail to institutional markets, with recent moves suggesting retail is regaining power. Our ambition is to build a distribution interface that provides global clients access to best in class offerings across the investment management spectrum, ultimately applying retail-style distribution dynamics in institutional markets. This disintermediation of the institutional channel will permit retail wealth and asset managers to see investments that would ordinarily be out of sight, allowing us to capture the benefits of global product flow and reduce fees by being the exclusive provider.”
Other key business initiatives in 2019 included:
• In September 2019, the wealth planning business expanded with the acquisition of WFI, a high-quality IFA business with approximately £550m under management and advice
• Leigh Philpot joined in September 2019 as Head of Client Proposition to help the firm grow and enhance its business proposition for clients and intermediaries and generate new sales opportunities.
• Rob Suss joined the Board in June 2019 as a Non-Executive Director and provides valuable insight and advice on global wealth management strategy, having charted a successful career in financial services including 18 years at Goldman Sachs.
• A new fee structure was implemented across the wealth planning platform from June 2019 and Kingswood’s Managed Portfolio Service has been enhanced.
• In May 2019, Kingswood acquired an interest in US-based Manhattan Harbor Capital Inc., enabling the firm to gain a key, strategic foothold in the largest global wealth and investment management market.
• Najib Canaan joined in March 2019 in New York as US CEO to lead the Group’s growth efforts in that market.
• Appointed Richard Jeffrey in February 2019 as Chairman of the Investment Committee.
• Richard Klein joined to lead and expand the firm’s alternative product offerings for distribution to its growing client base.
Buzz West, Kingswood Chairman, concluded: “We have cemented the Kingswood brand as a leading global wealth management solution. We have an incredibly exciting 12 months ahead and look forward to deploying new capital, growing the platform, adding new talent and ultimately adding value for shareholders. I’m looking forward to working with the Board and executive team to deliver on our ambitious objectives.”