Speaking to ifa, Guardian Advice head Simon Harris said that it was important for the advice industry to have succession strategies in place to avoid ongoing consolidation of independent practices.
“There is nothing sadder for me than seeing a practice being forced to sell without having succession planning in place,” Mr Harris said.
“Advisers put in a lot of work to build these successful practices and to not leverage that and get the best return on the effort possible is quite sad.
“Unfortunately, that’s when consolidation comes in and people don’t get rue value for their assets.”
Guardian Advice recently launched its Practice Equity Model and yesterday announced its first partnership under the deal with Western Australia-based practice Capital Managers.
The arrangement will see Guardian take an equity share of no more than 40 per cent of the businesses value, in order to help it transition to new ownership.
“I guess what differentiates our equity deal from others is that we take a minority share from the businesses, as we don’t want to be the controlling entity in financial planning businesses,” Mr Harris said.
“We acknowledge that experienced financial planners and those people running those businesses are better at it then us, but we do have complementary partnering skills that we are delivering.
“They run the business their way and we just get involved with them – as we would any of our practices – at a licensee level, where we provide them with licensee services.”
Mr Harris said that Guardian’s arrangement is crucial if the next generation are going to able to take over financial planning businesses from retiring baby boomers.
“What we’ve seen in our review of the marketplace is many of the baby boomers have been so successful over a number of years that the size and value of their businesses are quite substantial, yet we’ve got the younger generation that don’t have access to that capital,” Mr Harris said.
“That’s why it’s really important as an industry to find innovative solutions to help those younger advisers.”
You would need to have your head examined if you were to EVER consider buying another planners book from him! Seriously…..what would you expect to achieve? Do you know the MASSIVE risk involved?? If you manage to get a good clent list, they then have to like you, you then pray theres no recession event or market downturn becausebthats your fault for not selling out the day before. If you can navigatebthrough all that & loads more issues, your clients will e told theyre an absolute MUG if they dont SACK YOU! YES YOU, the fee sucking bad guy, the dodgy financial planner the industry funds bash…..you know the rest!! Succession, buy in, earn out etc etc…..all buzz words found on swarmy linkedin profiles. Reality is that your FP business is not worth much at all. Buyers are faced with a mountain of hard hard work to save the fleeing dopey clients they bought. Sellers will be tap dancing & juggling harder than ever to keep them there during the right back period. Just NONSENSE & BS.
Too Little Too Late, Consolidation is inevitable. FOFA has killed the goodwill value of adviser business. Why would any one (even if they have the money or could get a loan) buy into a business with so much regulatory risk and an uncertain cash-flow future. The best an smart adviser can ask for now is work for today, charge like a lawyer, and hope, pray, that somebody stupider than themselves comes along with a fat cheque book and stars in their eyes and makes a dumb offer. The next generation of adviser is a Gen Y, uni grad with no idea how a real business works or been around long enough to see how much the world Financial Services business has changed. The old business model is dead.
I think it’s commendable that Guardian Advice are addressing succession planning as an issue in their group. To buy equity of 40% in the practices that want or need it though is flawed.
In order to achieve a good succession outcome the Practice principal has to take ownership of the process from the outset or it will not succeed. That means financially and emotionally.
The Principal has to determine when and how he wants to exit his business first of all, and that means discussions with staff, family, and other stakeholders and reaching a consensus that everyone is happy with especially the owner.
Once this is clear, goals need to be set, timelines agreed and an action plan put in to place. There are obviously many other phases to the succession planning process, but planned well it is a process that can produce great outcomes for business owners. For a Licensee to “buy in” as it were adds another layer of complication into the business.