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Acquisition appetite grows amongst advisory firms

25 July 2018

Advisers are showing growing interest in buying up other firms, according to the latest survey from wrap platform Nucleus. 

As many as 42% of adviser business owners said they would be interested in acquiring another advice firm, up from 37% last year. However, the number of firms looking to sell within the next five years was lower at 35%, while 30% said they have no interest in selling.

Among those looking to sell, nearly half said another advisory firm was their preferred route. The attraction of a large consolidator ranked less appealing, dropping to just 4% from 13% last year, while being bought by a product provider was equally unattractive with just 1% considering this option.

The annual survey also should a sharp rise in the number of firms putting a succession plan in place, up from 25% in 2017 to 42% this year. However, over half of owners still don’t have a plan, with just 10% considering retirement to be an immediate concern or challenge.

Barry Neilson, chief customer officer, Nucleus, said: “Succession planning and M&A activity is something every advice firm needs to consider. Having a plan in place is vitally important, even if it is 10 or 20 years off, as unexpected decisions can come thick and fast and put a big strain on capacity if not prepared for.

“The challenge of succession is to ensure a smooth transition for staff and clients, minimising disruption and risk, all the while addressing the entirely reasonable financial interests of the founder – something that can be a tricky balancing act.”

Neilson said that the survey showed a clear trend towards selling to a like-minded firm as a means of ensuring a consistent experience for clients.

He added: “Some advisers may fear that the years of trust and loyalty built with these clients could be eroded quickly by a sale to a large consolidator. By having a properly planned and professionally executed sale or transition, it’s entirely possible for advisers to realise their succession plan and come away satisfied that they found the best balance possible and that their loyal clients are in safe hands.”

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