Since leaving the relatively secure universe of networks and support services five years ago, my post-RDR world has been solely focused on establishing a new advice business from scratch.
Over the course of time, we, like many, have received a number of approaches to buy the business. Each approach was initially flattering and potentially exciting but, under the microscope, they shared a common deal breaker – we could not see how the “deal” would best serve the interests of our clients.
So, as we have moved into profitability and secured new investment with a strategic partner determined to build a leading national advice brand, we ourselves are now ready to start our journey of acquisitive growth.
Subsequently, we have been looking again at what options are available for firms seeking a good deal for both themselves and their clients.
But who do we benchmark our shiny new acquisition model against? AFH, Ascot Lloyd, Succession, Perspective, Fairstone, Harwood, 1825 or SJP? Or do we go straight to the agent brokers to establish why every firm they represent is worthy of 5x recurring, plus a share of incremental business and, of course, a consultancy fee, all paid up front?
Call me naive but I would suggest the reality is quite different. The majority of IFA owners I have spoken to over the last 25 years know full well how much money they could get for their business but do not know how to be sure their clients, friends, goodwill or legacy will be treated going forwards.
Of course, these firms will all promise fantastic customer service, technology, central investment solutions and the like, but I wonder how many would be measured against client satisfaction or experience, or how proud they are to be part of the new organisation.
One of the main risks is linked to the demographics of our profession and the sheer number of advisers looking to sell their business and retire over the next few years.
My fear is that the simple concept of excess supply over demand will lead to a worsening deal for both advisers and clients alike, as those doing the acquiring become singularly focused in their desire for a greater land grab of funds under management.
Over the years, we see surveys and insights occasionally challenge our perceptions. In Australia, advice group IPAC reported that “profitability is more attributable to higher contact with clients by advisers than simply higher levels of FUM”. Who knows, maybe they are right?
Either way, when choosing where to sell a business, I wonder how many principals seek out a deal where their clients benefit from this philosophy, as opposed to the predominance of commercial FUM based models in the market today.
What I am sure about is that advisers have not just been good at building successful businesses but also building and delivering a first-class service to clients. When looking to sell, the continuation of this service must play an important part of any agreement to acquire the business, otherwise we risk client disappointment as an inevitable outcome. That is the deal breaker.
Nick Kelly is chief executive of Alexander House