M&A could create more sustainable Planning profession
Increased consolidation among Financial Planning firms could create a more sustainable profession, according to a number of Financial Planners.
Financial Planners have told Financial Planning Today that increased consolidation in 2022 could be a positive development for the market.
Financial Planners previously told us they expect a rise in M&A activity among Planning firms this year.
Many Planners expect an increase in consolidation. They say and that while this could cause upheaval in the short term, it could pave the way for a more sustainable profession with clearer career paths and opportunities.
Martin Bamford, Financial Planner at Informed Choice, said: “We're likely to see further consolidation in the Financial Planning market, with a reverse long-tail of single person firms and then a small group of medium size and larger firms. More M&A activity in the sector could reduce innovation, but should also help to create a more sustainable profession, with clear career paths for administrators, Paraplanners and trainee advisers.”
He added that the increased M&A activity could provide career opportunities for some advisers and could provide good hunting grounds for Financial Planning firms looking to hire.
He said: “All change creates disruption and opportunity. Some staff at newly-acquired firms are likely to enter the recruitment market and businesses doing deals well should be fast-growing, with the need to hire more people.”
Tony Smith, group managing director at Elevation Wealth Management, said that many acquisitive firms were likely to be looking to increase their headcount. He added that there is the risk that acquired firms could see some Financial Planners leave after an acquisition due to feeling “snubbed by the new owners” or not believing in the ethos of the new ownership.
He said that Elevation sees more retention issues with staff and clients where the size gap between a smaller IFA and the acquirer is large.
“The culture, processes become too foreign – not personal enough for clients or staff – this is where an increase risk exists,” he said.
One Financial Planning firm which has been very acquisitive in recent times is Tilney Smith & Williamson.
Jason Hollands, managing director of corporate affairs, at Tilney said that while the firm is always on the look out for Financial Planning firms to acquire, it is important that Tilney is a good cultural fit for the firm’s advisers or they will not flourish within the business post acquisition.
He said: “Most clients focus on the personal relationship with their adviser rather than the brand they work for. Therefore you really want to keep the advisers around when you make an acquisition.
“We don’t like to do a deal unless we know all the advisers are behind it. Advice firms really are a people business.”
One way Tilney makes sure that advisers are on board with the deal and will stay with the firm longer term is to make sure it maintains high levels of staff ownership in the business. Staff ownership is often structured into the acquisition deals it makes.
Mr Hollands admitted that sometimes there are staff cost savings made when making an acquisition deal, but that it tends to be the administrative staff rather than any client facing and/or advice roles.
Growing adviser firm One Four Nine agrees that it is important to make sure culture and values of an acquisition are a good fit.
Matthew Bugden, CEO of One Four Nine Group, said: "The approach we take at One Four Nine is to work very closely with the team at an acquiree company, ensure our values are aligned and make plans for the future of the business that includes the staff – whether that involves putting a succession plan in place, or bringing younger staff under our wing and ensuring they can access the wealth of resources and support we can offer them, ultimately nurturing their career and developing their talent.
"Demand for financial advice continues to increase but advisers who can meet this demand are in short supply, therefore it is critical to our business plans to retain and mentor talented staff who will become the advisers of tomorrow."
He said increased M&A should lead to greater competition which should play into the hands of the businesses looking to sell and could ultimately lead to a stronger market for the advisers of tomorrow.
"An increase in M&A activity around Financial Planning firms should mean there is greater competition between acquirers to impress – which can only be a good thing for Financial Planners wishing to sell. It is crucial that these sellers find the right buyer – if you get this part right, then an acquisition will ultimately improve the client proposition and service level overall. We speak to a lot of firms who have been successful for many years in their own right who simply don’t want to become another cog in a faceless network. They want to be part of something dynamic and fresh where they are valued participants in shaping the future of the business.”
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