Should I stay or should I go now...

Being the stalwart owner of an IFA business, these days, must feel like you are clinging horizontally to a lamppost as a tornado of PE money sweeps the market.

The feeling must be similar for the employed advisers, suddenly caught up, without warning, in the acquisition of their firm. Much is talked about (rightly) regarding the impact on clients of these deals, not so much about the effect on the advisers themselves who work within these practices.  

The last few months has felt like a period like no other for M&A activity within the advice sector. It was reportedly at a 5 year high in 2021 and shows no sign of slowing down this year. A recent article in Moneymarketing estimated that IFA business owners can receive an average of 2 approaches every week.

In addition to the more established consolidators, the past year has seen a real influx of new start-up, PE backed players, all competing to buy firms of all sizes, at multiples we haven’t seen for years. These must test even the most steadfast of business owners, particularly with the ever-increasing regulatory costs.

Add to this some ‘eye-brow raising’ announcements involving some major industry names in the last few weeks and months. Aviva buying Succession, Sanlam being sold off to Oaktree Capital, Canaccord buying Punter Southall Wealth (following on quickly on the back of their purchase of Adam & Co). We now have the behemoths of Brewin Dolphin being bought by RBC, and Tilney Smith & Williamson (following their headline deal only 18 months ago) reportedly in discussions with NatWest.  

According to Experian research, Financial Services was 3rd by value (behind Manufacturing and, narrowly, Wholesale & Retail) and 5th by volume, in terms of M&A activity last year. This clearly shows the value placed on the advice sector.  

There will be winners and losers in all this, but it is clear it will result in fewer firms and an ever-increasing gap between the corporates and the purposefully small IFA practices. I will leave it to the more established industry spokespeople to discuss the ramifications for clients, but for the employed advisers themselves that I speak to, who are going through it and facing the prospect of their firm being acquired, it largely depends on their own personal view of the acquirer, their reputation and their intentions.

Done in the right way, by the right firm, with the right proposition, it can be a positive development for an employed adviser, with the increased backing often leading to better marketing support, more clients, retention bonuses and higher earnings potential. Equally, it can leave the adviser concerned for the future, and feeling like they are just another number in a large corporate machine that they never signed up for.

There is only one thing that is certain when a merger or acquisition takes place; there will be teething problems. Shared services will likely encounter redundancies and the integration of clients, culture, charging structures and systems will never be straight forward.

I would be keen to hear your views on this remarkable period in the sector and to speak with anyone experiencing this kind of change, who might want to review their options. After all, you may not have a say in whether your firm is acquired, or who the purchaser is, but you can certainly choose whether or not you want to stay. Do you try to ride out the inevitable storm, or take it as an opportunity to change direction towards potentially calmer waters?