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Dennis Hall: Why I don’t have an exit plan

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I will be castigated for saying this but I do not have an exit plan. I know; it is ludicrous at my age. In fact, why have I not exited already?

I thought it was only me that had not figured it out but after several conversations with others in a similar position I find I am not alone. It is not that we have not given it any thought; it is simply that the options being touted are not compelling.

Consolidators come knocking almost weekly with generous looking valuations but when I have bothered enough to crunch the details I discover that clients end up paying higher fees post-acquisition. If I thought it was right for clients to be paying higher fees, I would be charging them now.

And therein lies the rub. The deals do not appear to create an equal or better outcome for clients. They end up paying more for less. More fees, less choice, lower service levels and less trust?

I can think of several advisers who have sold their clients, and a few years later, after establishing a new business, have won them straight back. Something was clearly missing after the sale.

Consolidators are a distraction but I feel I ought to be having the conversation, if only to keep an open mind. The truth is, I am not ready to exit. Not a complete exit. Though a phased withdrawal into other interests would work. There is still stuff I am learning that gets me out of bed in the mornings, but not the technical stuff around pensions and tax. That leaves me cold.

It is the people that interest me: their stories, what motivates them and their behaviours, particularly in relation to financial decision making.

The more I learn about people, the more I want to change the way we communicate with them, and I reckon I could work on this for a few decades more.

“If I thought it was right for clients to be paying higher fees, I would be charging them now.”

The key for me is to create a self-sustaining, self-managing business that reduces my day-to-day workload and allows me to concentrate on the topics that interest me most. An exit of sorts, I suppose; but not an exit from the business.

Here is where I enter uncharted territory and one of the biggest challenges facing a business owner like me: passing control to the next generation.

My thoughts and emotions mirror those experienced by clients when discussing estate planning and making gifts. That loss of control.

The increased vulnerability of giving away assets. The fear that it cannot be undone. The fear of the next generation making a hash of it. The fears are not always rational, of course. But they are there.

Coincidentally, I have recently come across a couple of firms that have already embraced wider ownership through their staff. I have had a brief chat with one and am reaching out to the other. In both cases, the firms are larger than mine, which just might be the motivation I need to grow mine to provide that long-term sustainability. But an exit plan? Not really.

Dennis Hall is managing director of Yellowtail Financial Planning


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Dominic Thomas 3rd April 2017 at 1:11 pm

    Honest as ever. Points well made

  2. I think I came to the same conclusion a while ago now. I cant help thinking that the Apprenticeship sheme has something to offer in employing the person(s) to eventually take over the business and that once can influence the type of direction that person will head as well as retaining an interest in the business longer term, I feel that these people are my friends to a certain extent. It would also go some way to resolve the aging adviser situation?

  3. I have wrestled with all of the above options, including delegation of dat to day matters.
    However, no matter how hard you try you cannot delegate the personal
    attention and a hard earned trust based relationship that your clients
    just love you for!

  4. Ditto to all of the above. If only there was a group of like-minded IFAs who were at the same stage in their career/life stage who could get together and work out a co-ordinated strategy for solving this issue – something along the lines of a tessellation (trying hard to avoid the work ‘Network’) a reticulation of firms which would work together to co-sponsor, co-develop and co-support the next generation who would in turn buy into our firms, grow them and enable us to gradually and gracefully withdraw at our own pace. If only!!

  5. Neil F Liversidge 3rd April 2017 at 3:21 pm

    My plan’s simple, I plan to work ’til I drop. And my wife, kids, FCA and HM Government have precisely the same plan in mind for me!

  6. Well I sold out in 2015, but not to a consolidator. I guess I was a little lucky as this was not by first business disposal. I can see that many are still a little at sea with the topic. Perhaps the following may help:
    1. You must realise that in any sale, no new owner will ever run your business (Or treat your clients) as well as you have done. It is axiomatic. You just have to accept it.
    2. Do your due diligence on any acquirer. The object is to ensure:

    A. That they are not men of straw and can offer a fair price – up front. You are not in the hire purchase business!
    B. Never continue to work for the firm that buys you (see 1 above) that is a sure recipe for grief. (But by all means say on for a limited period at a defined workload as a self-employed consultant to help smooth the path, but NOT to provide regulated advice)
    C. That their ethos and approach is not too dissimilar from your own.

    3. You are not invincible. What happens if you fall seriously ill – or just drop dead? Is that fair to your clients?
    4. Indeed always remember that the value resides in the clients. If they are not content with the deal and walk, there is no value. So it is in your interest to choose a suitor carefully and once chosen, to do your utmost to ensure that the clients are happy with the change.
    5. I tried to find a suitable candidate to come in and work in the firm and to eventually take over. Maybe my specifications were too steep, but I had absolutely no talkers. Anyway by staying on do you really want to continue to be regulated and to take responsibility for any glitches that may arise from the new incumbents?
    6. Most importantly don’t have inflated ideas about what you think your firm is worth. Indeed you should be able to walk away (in theory) with absolutely no consideration, having done what you have advised clients to do over all the years and therefore have built up sufficient assets to retire fairly comfortably. Of course I don’t council giving the firm away, after all you have worked hard building a decent firm (it is assumed) and it would be nonsense to give it away.

  7. My contract with my clients is simple, when one of us dies it terminates. As that was nearly me last year I will be scaling down and only working with my clients, probably two days a week working on average, then I can choose whether to take on any new clients.
    That seems a happy medium to me, some have asked what happens if I die, I have given them choices. This may include a local adviser in the same network buying them off me in effect if I am no longer around, my family would get some value.
    To me that is retirement,having the freedom to do what you want to do in life, whilst still generating an income and serving your loyal clients.

  8. Having spoken to a serious number of consolidators (of which there are many), it seems like there are only a very very small handful which don’t require a) Moving client assets, b) Increasing client charges, and c) Compromising independence. These were my immovable constraints. Smaller firms were able to offer this deal shape but I avoided them as the cash requirement played on my mind.

    I found that in exchange for the above I did need to remain active post-deal, take my money over a number of years and integrate early doors (2yrs prior to full acquisition). All reasonable requests when asking someone to write out a cheque, I felt having acquired smaller client banks in the past.

    Moral of my story… I’m still running the business (salaried), advising clients as ever, training younger advisers and receiving capital. It is possible if you want it. You just can’t expect a huge payment and do nothing to mitigate the risk for the acquirer.

  9. Denis wasn’t it Arsene Wenger who stated
    “Retiring is for young people,” and “For old people retirement is dying
    The first question you have to ask yourself is which category you fall into.
    After you have decided that I suppose then you work on your exit strategy!

  10. sorry should stated do you fall into

  11. In my own experience – stay well away from consolidators. The sharks of the industry.

  12. Christine Brightwell 4th April 2017 at 7:20 am

    Spending time getting to know clients is the most important duty and service – whether as a trustee/DB scheme trouble shooter (me) or a financial adviser. Always keeping in mind that the person you are speaking with could easily be you daughter, son, mother etc speaking to someone else – and you know how you would want them to be treated – and respected. I always think putting good things and kindness into the world helps to balance the bad things. Well said Dennis

  13. Well said Dennis (once again). My exit plan is to take on increasingley more extreme sports as I get older and my son, who also works in the business, is now a shareholder and is sitting his ER1 exam today seems to wish to encourage me in this endevour…. can’t think why?If my wife or daughter start encouraging me to do so too….. I will start to get worried.
    Joking aside, succession from within the business, either with a family member or a former apprentice who has been trained in the way of thinking of the firm and developed relationships over the years with the same clients of the retiring adviser is a definate reassurance to clients I believe that they are not being “sold” to the highest bidder, but being supported in to retirement as their own adviser has to finally retire themselves like Harry Katz.
    Ideally, an adviser should be about 15 years younger than their clients as that way, they can support them for at least 15 years in to the clients retirement, by which time, they’d probably want someone with a bit more spark anyway!

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