MIDAS SHARE TIPS: AFH, the firm offering finance for the over-50s, could give YOUR investments a brighter future
The UK is growing older. Around 40 per cent of the British population is over 50 and within a few years, they will easily outnumber the rest of the country.
The trend spells all kinds of trouble for the NHS, social services and employment but it is a real boost for companies involved in financial planning and pensions.
AFH Financial Group is one such firm. Based in Bromsgrove, Worcestershire, the business has delivered an exemplary performance since joining the junior AIM market in 2014 and is set to double in size in the next three to five years.
Riding high: The UK’s ageing population is boosting AFH Financial Group
But the price has been hit by stock market volatility and the shares are now £3.20, down nearly £1 since September last year.
The current price fails to reflect AFH’s past achievements or future prospects, and the shares should rebound. There is a progressive dividend policy too.
The payout has increased four-fold to 6p over the past five years and chief executive Alan Hudson is expected to pay out 8p in the current financial year, rising to 10p in 2020.
Hudson founded AFH in 1990, naming the business after himself and his wife Fiona. The company has grown organically over the years but it has also made numerous acquisitions, particularly independent financial advisers, whose owners are nearing retirement.
Firms take on Hudson’s systems, processes and research capabilities and their clients benefit from lower costs and a more active investment service.
The approach seems to work. In 2017, Hudson told investors he wanted to increase funds under management (the amount of customers’ money that AFH manages) to £5billion by 2021 and increase revenues to £75million. The first target has already been reached and AFH is expected to surpass the second target this year.
Hudson is now striving towards £10billion of funds under management, revenues of £140million and profit margins of 20 per cent within the next three to five years. He will almost certainly succeed.
The company’s customers are mainly aged between 55 and 70. They have a decent amount of cash to invest, they are worrying about retirement and they want reasonably priced advice from a firm they can trust.
AFH ticks all the boxes and, the more the business grows, the better known it becomes with financial advisers wanting to sell and savers wanting to invest.
Many investment firms put most of their customers’ money into shares so they tend to suffer when stock markets turn unpredictable.
AFH is different, investing more in bonds, property and other assets designed to cushion savers’ money during retirement. That makes the company less susceptible to volatile share prices and a more attractive home for cautious investors.
The company has a rapidly expanding ‘protection’ division too, offering life insurance and critical illness products, primarily to young professionals with children.
MIDAS VERDICT: The population is ageing and few people can rely on defined benefit pensions so demand for financial advice is rising. At the same time, many independent advisers want to sell out, as the burden of regulation becomes too onerous. Both trends work to AFH’s advantage and the shares, at £3.20, are a buy. Hudson is the largest shareholder too, with 16 per cent of the stock, so he is well motivated to succeed.
THIS IS MONEY PODCAST
- Could your savings rate turn negative?
- How many state pensions were underpaid? With Steve Webb
- Santander’s 123 chop and how do we pay for the crash?
- Is the Fomo rally the read deal, or will shares dive again?
- Is investing instead of saving worth the risk?
- How bad will recession be – and what will recovery look like?
- Staying social and bright ideas on the ‘good news episode’
- Is furloughing workers the best way to save jobs?
- Will the coronavirus lockdown sink house prices?
- Will helicopter money be the antidote to the coronavirus crisis?
- The Budget, the base rate cut and the stock market crash
- Does Nationwide’s savings lottery show there’s life in the cash Isa?
- Bull markets don’t die of old age, but do they die of coronavirus?
- How do you make comedy pay the bills? Shappi Khorsandi on Making the…
- As NS&I and Marcus cut rates, what’s the point of saving?
- Will the new Chancellor give pension tax relief the chop?
- Are you ready for an electric car? And how to buy at 40% off
- How to fund a life of adventure: Alastair Humphreys
- What does Brexit mean for your finances and rights?
- Are tax returns too taxing – and should you do one?
- Has Santander killed off current accounts with benefits?
- Making the Money Work: Olympic boxer Anthony Ogogo
- Does the watchdog have a plan to finally help savers?
- Making the Money Work: Solo Atlantic rower Kiko Matthews
- The biggest stories of 2019: From Woodford to the wealth gap
- Does the Boris bounce have legs?
- Are the rich really getting richer and poor poorer?
- It could be you! What would you spend a lottery win on?
- Who will win the election battle for the future of our finances?
- How does Labour plan to raise taxes and spend?
- Would you buy an electric car yet – and which are best?
- How much should you try to burglar-proof your home?
- Does loyalty pay? Nationwide, Tesco and where we are loyal
- Will investors benefit from Woodford being axed and what next?
- Does buying a property at auction really get you a good deal?
- Crunch time for Brexit, but should you protect or try to profit?
- How much do you need to save into a pension?
- Is a tough property market the best time to buy a home?
- Should investors and buy-to-letters pay more tax on profits?
- Savings rate cuts, buy-to-let vs right to buy and a bit of Brexit
- Do those born in the 80s really face a state pension age of 75?
- Can consumer power help the planet? Look after your back yard
- Is there a recession looming and what next for interest rates?
- Tricks ruthless scammers use to steal your pension revealed
- Is IR35 a tax trap for the self-employed or making people play fair?
- What Boris as Prime Minister means for your money
- Who’s afraid of a no-deal Brexit? The potential impact
- Is it time to cut inheritance tax or hike it?
- What can investors learn from the Woodford fiasco?
- Would you sign up to an estate agent offering to sell your home for…
- Will there be a mis-selling scandal over final salary pension advice?
- Upsize, downsize: Is swapping your home a good idea?
- What went wrong for Neil Woodford and his fund?
- The incorrect forecasts leaving state pensions in a muddle
- Does the mortgage price war spell trouble in the future?
- Would being richer make you happy? Inequality in the UK
- Would you build your own home? The plan to make it easier
- Would you pay more tax to make sure you get care in old age?
- Is it possible to help the planet, save cash and make money?
- As TSB commits to refund all fraud, will others follow?
- How London Capital & Finance blew up and hit savers
- Are you one of the millions in line for a pay rise?
- How to sort your Isa or pension before it’s too late
- What will power our homes in the future if not gas?
- Can Britain afford to pay MORE tax?
- Why the cash Isa is finally bouncing back
- What would YOU do if you won the Premium Bonds?
- Would you challenge a will? Inheritance disputes are on the rise
- Are we primed for a Brexit bounce – or a slowdown?
- How to start investing or become a smarter investor
- Everything you need to know about saving