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Retiring IFA: Wake up to the benefits of professional connections


It is an accepted belief that people tend to gravitate towards others similar to themselves. This is as applicable in business as anywhere else. Familiarity is reassuring and what you understand you feel confident to pursue.

People from the same industry focus upon and value the same factors. They speak the same language. However, this is often not the case across professions and could be why advisers have had mixed success in establishing successful two-way relationships with lawyer and accountancy firms.

There have been a number of successful sale deals between companies in different sectors but it has not been as widespread as you might expect in theory, perhaps because the business models are so different.

Take, for example, solicitor firms, which do not not have recurring income like advisers do. But acquiring an adviser would bring a new stream to such firms’ revenues. Accountancy practices, meanwhile, have tax knowledge that can complement an adviser’s awareness of such issues. The technical expertise of a lawyer can also offer invaluable resource in dealing with such issues as divorce and probate.

The benefits are clear, so why aren’t more professional services firms partnering with each other?

Playing the long game

There are a couple of stand out reasons. First off, appointed representatives part of larger networks are restricted from having a business interest that is not a wealth management firm, which places a wall between them and other potential connections. Then there is the fact some advisers are focused on more tangible immediate benefits, such as building up fee income and assets under advice, as is customary in a deal between adviser firms.

The acquisition of an accountancy practice is usually a multiple of recurring revenue, such as 0.8 to 1.4 times recurring income over two years, with price dependent on quality of clients. Accountancy practices and lawyer firms do not have funds under management that can be moved onto a platform.

But acquiring an accountancy practice, for instance, can bring a stream of different clients that advisers have not previously marketed to. The average age of adviser firms’ clients tends to be quite high, with many at or approaching retirement. In contrast, the clientele of accountancy practices tends to be younger, such as small business owners.

So while tangible benefits of an acquisition are of course important in determining the value of a deal, the potential for new clients cannot be overlooked. An accountant, solicitor and adviser working together could satisfy all of a client’s needs under one roof. And bear in mind that integrating an individual into the business may be more straightforward than buying an entire new arm to it.

Client retention is an ongoing issue at every firm. Upselling existing clients to use more of the services offered is a route to increasing their value. A service proposition that meets financial, legal and business needs would allow firms to retain clients for their whole lives and work with future generations of the same family for many moons.

Henry Blunt is managing director of Retiring IFA


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