It can be a tough market for employee benefit consultants, given rising regulatory and insurance costs and the need to invest in technology, which continues to develop at pace.
This has driven consolidation in the market, particularly among larger advisory groups. But the challenge for smaller EBCs remains how to grow their proposition in an increasingly tech-driven landscape, without losing the personalised service they offer — for many their key USP when compared to larger competitors.
Generation Financial Services is looking to square this circle through a partnership with Swedish wealth management firm Söderberg & Partners. The Swedish company recently bought a stake in the business, as part of its wider expansion into the UK advisory market.
Andrew Waller the director and joint owner of Generation Financial Services describes this as very much a partnership, not an acquisition of the firm. He points out that Söderberg could have effectively bought the business out of petty cash, had it wanted to. “But they prefer to take a partnership approach, which suits our ethos perfectly.
“Söderberg has just taken a minority stake in the business and Generation’s management team and all our employees remain in place. It is important to us that we remain an independent business. Söderberg is looking to preserve the entrepreneurial spirit of the organisation, and our service ethos — but the serious money they are investing in us will enable us to invest in technology and product development as well as helping finance future acquisitions that should help us to continue growing the business.”
Generation Financial Services started in 2008, with Waller joining the business in 2010. He has worked in the industry since the 1980s, where he started his career with Abbey Life, before moving into the corporate advisory side a decade later. Waller joined Generation FS to launch its employee benefits division.
Since 2020 the business has been divided into three main areas: wealth management, a charity consultancy and the employee benefits business — now headed up by Jeff Scripps — and which won Corporate Adviser’s Small Advisory Firm of the Year in 2022.
The company has enjoyed organic growth over the last decade, driven in part by the business cross-selling its wealth management and employee benefit services. The corporate and employee benefits division now services around 100 clients, which on average have around 80 and 90 people in their workforce.
Waller has now largely stepped back from the day-to-day client servicing, and instead focuses on the wider strategy for the business, or as he puts it, “how we can deliver real value for our clients”.
“We still remain a fairly small boutique service which prides itself on the personal service we deliver to corporate clients.”
Waller admits there is now a need for this to be matched with technology-powered services and products, which is part of the appeal of the partnership with Söderberg.
“Söderberg are very tech-savvy, and have grown their business using AI models for example. They are launching a new investment platform and back office systems, which are fantastic for both the wealth management and employee benefits sides of our business. They will add more functionality from a client’s perspective and gives us access to a new range of investment products, which will include products like online Isas that we can roll out to clients and their employees.”
This functionality is important to help smaller firms like Generation compete with larger and mid-sized competitors he says.
Waller points out that there are some interesting synergies between the Swedish and UK financial services markets — as well as important differences. He says that the technology that underpins the Swedish pensions systems is considerably more advanced than in the UK.
The most famous Swedish imports used to be meatballs, Abba and Ikea, but Stockholm is increasingly seen as an important tech hub and home to a number of billion-dollar ‘unicorn’ tech firms — including Spotify and the payment app Klarna.
“Sweden certainly seems to be a leading light in the tech world, certainly in Europe,” says Waller. “It was quite mind-blowing when we saw what Söderberg’s technology was capable of doing.”
This is certainly reflected by the fact that Sweden has had a functioning pension dashboard for more than a decade, he says, while plans to introduce this digital architecture into the UK pension landscape have been beset by delays.
But he points that there are important differences too: “There are probably just five major pension schemes in Sweden, where we have got 35 schemes and a lot of legacy business, be it section 32 contracts and so on.”
This is why a partnership approach is important, says Waller, with Söderberg utilising the market knowledge, experience and insight Generation Employee Benefits has within the UK.
So what will this mean for the kind of systems Generation will be able to offer clients? Waller says: “If you take the back office systems as an example, they are building a central hub and looking at the getting the ‘best-of-the-best’ across different areas, whether its a fact-finding system, or the investment proposition. This investment gives us the opportunity to grow the the business not just by the improved productivity and products this offers, but also in the way we communicate those products.”
Waller says that Söderberg’s investment will not only only facilitate investment into new technology it will also provide a financial war chest to help Generation itself expand. While much of the growth to date has been organic, Waller does not rule out future acquisitions to take the business to the next level.
Waller says that the company has seen growth recently in the private private medical insurance market. “Possibly one of our first acquisitions will be a private medical brokerage.”
While this investment will enable Generation Employee Benefits to grow and expand, he says it is important the business does not lose sight of its key attributes. “Given ongoing personal indemnity costs, FCA charges and the need to invest in technology businesses need to be a certain size to operate competitively in this market.
“But I don’t think that significant merger and acquisition activity, particularly when it comes to the larger advisory firms, has necessarily been a good thing, and has reduced to some extent competition in
the market.”
However he does say that consolidation of some larger employee benefit firms has given smaller consultancies, like Generation Financial Services a competitive edge in this market. It can take time for businesses to integrate as part of a merger and in the interim service standards can be affected, with some firms failing to deliver the same hands-on service to some smaller or mid-sized clients as they become part of larger group.
“We have certainly come to the conclusion that we needed to grow to allow us to add functionality, particular when it come to tech. But we very much preferred the partnership model offered by Söderberg than a full scale merger or acquisition.”
He says their approach is much more collaborative than the “adversarial” business practices that are more commonplace in the US and increasingly the UK. He adds: “The solicitor actually said it’s the most non-adversarial contractual purchase he has ever seen. It’s a very positive way to do business and something we are all hugely excited about.”
Why does Waller think that Söderberg selected Generation FS to invest in, ahead of other advisory firms in the UK? Was it the fact they offered both wealth management and employee benefits that made it stand out from other similar businesses?
Waller does not think so. While Söderberg started out an an employee benefits business itself in Sweden, it has predominantly focused on the wealth management sector when it comes to its UK investments — buying a majority stake in the IFA business Timothy Jones & Partners, and a minority stake in Cambridge-based Dartington Wealth Management and North London-based Atherton York (also both IFA firms).
Waller says the key has been the ethos and values of the business Generation Financial Services. “It was probably a happy coincidence that we also offered employee benefits. Clearly they are looking to invest in companies that were profitable, and have growth potential, but it was really about the attitude of the business, its shareholders and the directors, rather than just looking at the finances and the balance sheet.
“Early on in the process their initial questions were all about how we dealt with our clients and employees.”
There is the assumption that Scandinavian companies may have a more societal or paternalistic approach to business Waller says. “It isn’t all about profit at any cost, and it isn’t just about stakeholders that own the shares. There are questions about what you are doing for staff, how do you treat them, does this reflect in how you treat customers? I understand they have walked away from investing in some very profitably advisory firms because the ethos wasn’t right.”
But Waller says these attitudes are becoming more widespread in the UK now, in part due to the Covid pandemic. “I think this led to many businesses reflecting on their role as employers and their duty to staff. Companies are becoming more aware of issues around mental health, stress and financial difficulties.” This he says has created opportunities in the employee benefit market, particularly when it comes to issues like financial education and wellbeing.
“These are issues we have been involved with, and I think this was recognised in our recent Corporate Adviser award. We are keenly aware of the need for products and services that engage staff directly, whether its tech-driven solutions or face-to-face help, and deal with these wider issues to support employees at all levels.”
Waller says that as part of his strategic role within the business he sets himself a project for the year. “Last year it was ‘outside the box’ ideas, and this coming year it is to be focused on excellence: delivering a
good service for clients isn’t sufficient. What do we need to do to make this an exceptional service?”
He remains optimistic that the deal with Söderberg will help him meet these aims.