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IFP conf: Chamberlain attacks ‘value destroying’ networks

Simon Chamberlain new Aug12

Succession chief executive Simon Chamberlain has blasted “value destroying” networks and attacked the support service model.

Speaking at the IFP annual conference in Newport today, Chamberlain said network members would find it more difficult to sell their businesses and raised concerns about liability issues with big distributors.

He said: “The fact is Sesame, Openwork, Intrinsic, Positive Solutions, and Tenet own absolutely nothing. These are companies that destroy value. No company is going to buy a business that is networked on liability.

“You have got to be directly regulated if you want to successfully sell your business otherwise you cannot possibly negotiate when people try to buy it.”

Chamberlain then hit out at support service firms. He said: “Even worse are the non-regulated compliance firms like Threesixty. These are non-regulated firms going around telling everyone how to be regulated. It is an absolute joke.”

Speaking to Money Marketing after his session, Chamberlain said: “There is no inherent value in a network model unless you own it – there is no inherent value for network members.

“The proof of that is networks have been sold time and time again and I have never seen an advisory business pick up any money from it. 

“When DBS turned into Sesame, the owners walked away with millions of pounds but member firms were treated like cattle. That has happened at Interalliance, Millfield, The Money Portal, and Honister. They just sell advisory firms like they are cattle and there is never a benefit for the people that created value.”

Threesixty services managing director Phil Young says: “There is neither any opportunity or requirement for Threesixty to be regulated by the FSA so I do not really see how this point is relevant in any way. If we were required to be regulated then we would be.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Writing as someone who acts extensively for buyers and sellers of IFA businesses I can’t agree that network members find it difficult to sell their firms. There are different issues to address but these are no more difficult to deal with than the long liability trail for direct businesses. The key factors in businesses of all kinds when coming to sell are common. Strong client relationships, good processes and a keen eye on costs. If these are present then the route to authorisation is a secondary concern.

  2. I think this is something that needed saying for a very long time.

    However Simon missed one important point with regard to Support Services. These services are heavily used for compliance assistance, but carry no responsibility. If there is an issue with the regulator it is still the firm that faces front and centre – the Compliance Adviser bears no responsibility whatsoever. Presumably it doesn’t even refund the fees. An odd state of affairs.

  3. No one would know more about treating member firms like cattle and destroying their value whilst owners walk away with £millions. He’s been doing it all his working life

  4. Some valid points in the article. However it is no diferent than owning and selling a football club, not sure the players are seen as cattle however. I actually believe that it is the individual firm’s that are worth the money especially if they focus on building client loyalty and can demonstrate having a CRM system that works. Linear has bought two such companies this year and would happily buy others if they were available.

  5. With 30 yrs in M&A work mainly linked to FS I could not agree less with the first readers comment. The point Chamberlain is making is valid. Serious buyers do not want the complication and disruption of de-networking a business to take into their DR firm. There are NO serious buyers out there that are network members. I suspect reader 1 is dealing with the 1-3 x trail 50% initial 2yrs derferred. That is truly a destruction of value after years of hard work! If you are with a network you already have a risk premium and discount applied before you go to market. Many more reasons/factors ..but life is too short and blogs should be shorter.

  6. Very good points in the article.The Network model does have flaws ,however with some tweaking could be made more attractive i.e
    . Netwoks having seperate Ring fenced account for AR monies
    .A forward thinking network would have a robust Business Buyout Plan for retiring ARs
    .Offer shares in the Network to ARs

    Ahhhh wishful thinking

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