BT’s annual study tour this year took advisers to the United Kingdom.
The five-day trip included meetings with advisers, investors and industry bodies. This short article is part of a series of key lessons learnt from the trip.
There is a recognition in the United Kingdom, like Australia, that scale is key to success in financial planning. As a result, there is a rush to consolidate, including business succession. A well-thought through succession plan will often result in a higher multiple, ultimately being paid for a business.
Given the regulatory changes and compliance needs in the UK, senior advisers can either reinvent themselves, or tack onto a larger business and leverage their scale. This is playing out in Australia too.
The notion of ‘consumer duty’ is driving some of the change and consolidation within the UK market. Consumer duty requires firms to put consumers at the heart of their business and focus on delivering good outcomes for the client.
What a buyer wants in an advice practice
The global Azimut group, better known in the local market as AZ Next Generation Advisory (AZNGA). AZNGA is a buying group. It takes stakes in financial advice firms and owns ~50 practices in Australia, and gave the BT UK Study Tour an insight into what it looks for in an acquisition.
Azimut says that adviser numbers are decreasing, and the remaining members of the industry are in a position to be more selective about clients. That allows them to push up client fees, so the net result is advisers take on clients that can afford advice and can pay higher fees.
Azimut’s representative, Massimo Guiati, said a good financial planning practice in Australia should have around $15 million in revenue, and, when acquiring, his firm is looking for the following four key pillars, of which earnings is only one.
- A shareholder value proposition of 30 per cent EBIT.
- A client value proposition that includes formal house pricing models, so you know what each client is costing.
- A people proposition so all their employees have clear roles and responsibilities, and there are succession plans within the business.
- An architecture and governance which includes a one-year business plan and a three-year strategic plan.
Underpinning all four is culture. Guiati says a good financial planning practice has clearly articulated values and behaviours that are monitored and measured via key performance indicators.
For Australian advisers, it is a reconfirmation that business succession planning needs to start well before you plan to retire. An adviser will do better, whenever they sell, if they have a succession plan in place.
