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Succession Planning | Latest News

Our view of the IFA succession planning landscape

One topic that crops up in countless conversations is the current shape of the UK IFA market.

The most reliable market data probably comes from the FCA. Their most recent (2018) data confirmed that there were 26,667 individual financial advisers in the UK, working at 5,246 firms. Approximately nine out of ten firms have less than five advisers, so it seems small firms still dominate.

According to the 2019 Heath Report, the average advice firm owner is circa 55 years of age, and Octopus Investments produced a report in August 2019 that suggested 69% of firms do not have an adviser below 30 years old. Several surveys (New Model Adviser and the Heath report again) concluded that between a third and a half of the advisers currently active are looking to retire in the next five years.

My own experience meeting with (predominantly) the owners of IFA users of the Transact platform over the last three years confirms the numbers above. Significant numbers of small IFA firm owners are looking to retire now or in the next few years. Their decisions are frequently driven by their age and the pressures on them to grow their firms to justify the cost of doing business. Pressures, like an increase in the cost of regulation and professional indemnity insurance, force multiple transformational projects like regulatory compliance, technological improvements, organising people and so on. Their desire to retire strengthens as the weeks and months pass and they grow anxious in the awareness that, without a clear plan, their exit options potentially weaken as time goes by.

On the flip side of this coin, I’ve also met a significant number of ambitious businesses, well prepared for scale and keen to grow their firms beyond organic referrals. They can see the opportunities to grow through acquisition. They are well prepared to provide a solution to sellers and they are willing to take some risk in the pursuit of growth. The best thing about these firms is that, but for different stages of their personal journeys, they think the same about the ultimate clients and are like-minded in their focus on providing independent financial planning of the highest quality. I believe clients and the market would benefit greatly if these two sides worked together more actively to fulfil each of their ambitions.

As firms wanting to exit find firms looking to grow, M&A activity in the IFA space seems set to continue. If you find yourself in either of these camps, we have developed useful content and resources on our site for both buyers and sellers. If you want to discuss your options, get in touch with us directly.

By Matthew Marais

 

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