Thinking of selling your advice business? Maybe read this first.
Research carried out by Albermarle Street Partners as part of the Coalition of the Independent Initiative (a recent FT Adviser article gives a good background to the initiative – you can read it here) provides some interesting insights for any adviser thinking of handing their clients over to a consolidator vehicle.
Conclusions from 49 advisers surveyed showed:
Almost three-quarters (73%) said consolidation of the advisory market had not been positive for clients.
Three in five (59%) cited ‘weaker focus on clients’ best interests'.
Almost a third (29%) cited ‘less individualised advice'.
More than one in 10 (12%) cited ‘loss in diversity of approach'.
One adviser was quoted as saying: “We would worry that clients are not being looked after properly by a firm trying to make square pegs fit into round holes.”
Another said, “Those larger companies aren’t cheap. And they don’t appear to provide better service.”
The driving force behind the Coalition of the Independent is to find an alternative to the consolidators.
The group has articulated five specific aims:
Lower cost of borrowing to allow independent financial advisers to grow by acquisition.
“A few of the more forward-thinking lenders are able to provide finance based on a recurring income stream, but it can come at a price that some would find prohibitive.”
“The FCA makes it so difficult for mid-size companies to be able to take on another firm due to capital adequacy rules”
Increasing awareness of advice as a profession
Many advisers plan to retire soon but there is no one to replace them.
Retaining staff was advisers’ second biggest worry followed by recruiting staff in fourth.
Law and accountancy continue to outstrip financial advice as careers of choice.
Creating an independent academy to encourage advice as a second career.
Lower the cost of compliance, especially FCA & FSCS fees.
45% of the advisers surveyed had seen FSCS levies double over last five years.
Over a quarter had seen PI costs double over last five years.
Lighter-touch regulation that focused on creating positive outcomes for consumers rather than preventing poor outcomes.
“Focus on preventing poor outcomes necessitates the need for heavy-handed rules, punitive levies, and an overbearing burden for smaller firms. If the regulator shifted its focus toward creating positive outcomes for consumers, the need for regulation would be lighter and the burden for smaller advisory firms may not be as great. This would enable advisers to help more people as the cost of advice would reduce”
Clearly, not all consolidators are equal (I know of some that come recommended by advisers, post-sale) but I would recommend doing full due diligence on their claims, particularly when they are trying to persuade you to sell to them.
Some advisers may not give too much thought to what happens to clients once they have moved on but this isn’t the case for most of the advisers I’ve met. They have spent a career providing the best possible service they can and have built strong and close relationships with not their clients who often end up becoming friends.
Resisting the siren song of the consolidator can’t be easy, particularly when they are so persistent (84% of advisers involved in the Coalition have been approached – often multiple times). There is no easy answer but it’s heartening to see that some advisers are banding together to fight for what they believe in – independence and integrity.