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Protection policy

What about the plight of clients when a firm hits the buffers?

Flick through any trade paper or magazine at the moment and you will likely be confronted with a story about the latest IFA, national or network in trouble. The most recent is Park Row and the media spotlight has been firmly trained on its negotiations to find a suitable home for its 240 advisers.

The plight of the advisers caught up in the middle of all this is a real concern and rightly demands its fair share of column inches. But what of these advisers’ clients? For customers of Park Row, the collapse of the deal with 2Plan has probably left many wondering where their investments are and who is looking after them. Not at all reassuring when many might have only just started to glimpse positive returns following the collapse of the markets.

The story of David and Goliath has never been more relevant in this market as more Goliath firms go under by the day, the smaller firm is left to clear up the mess and restore confidence in the IFA business model. These grand failures are causing untold chaos and much of it comes down to fundamentally flawed business models.

What should underline all these acquisitions and buyout decisions is who will service the needs of the clients. The fundamentals of an advisory firm are to provide clients with solid, fit for purpose financial planning advice.

The relationship between an adviser and his or her clients is one based on trust and in a time when financial planning is a top priority for many consumers, that trust is essential if we are to get consumers to plan for their financial future and life events.

It would put a strain on even the strongest of relationships if one party was unsure whether the other will still be around tomorrow because the firm they work for has hit the buffers.

Unfortunately, it is unlikely that we have seen the last major advisory firm go to the wall. There are a number I am keeping my eye on because the true solvency of some of the biggest IFAs and networks is questionable and while I am comfortably in the buying seat, it does not do the profession or wider consumer confidence any favours to have clients, regardless of who their adviser is, left in limbo. All successful advisory businesses put clients first and there is no justifiable reason why that should not also be the case when a firm is look-ing to “rehouse” its advisers or indeed sell its book of business.

Therefore, with the failure of Park Row and the narrow avoidance of an “Armageddon scenario” that Mark Lund, CEO of Honister Capital, said would have occurred had The Money Portal not been acquired, it makes one think there should be more prescriptive policy in place to protect those affected by these failures and less discretionary decision-making from the FSA.

This is a people business and the people we need to be concen- trating on are the ones without whom we would not have a business to run, sell or acquire.

Sheriar Bradbury is managing director of Bradbury Hamilton

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Comments

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  1. Among other definitions Limbo is described as an imaginary place for lost and neglected things so yes I would agree that this is not the approprate place for clients but when there are so many of them out there you have to ask yourself who will look after them, or more to the point who would you recommend they see when you can’t remain in the industry. Thanks to the burden of regulation which has increased in line with the failure to regulate effectively we will indeed see many more firms got to the wall which is probably why the regulator wants firms to put money aside for future liabilities. Whether they get to the RDR beach head is another matter altogether, some may choose to fall over voluntarily.

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