Greenslade believes that 1 December (when the majority of the Code of Professional Conduct comes into play) will herald the start of a major shift in the attitude of advisers. For the one person adviser practices that will need to be compliant and provide all advice in writing, the costs of doing business will increase substantially.
For many, those costs will be unsustainable, unless they can be offset by a commensurable increase in revenue. Greenslade quoted some indicative costs for a single operator practice where the adviser is not aligned to a product supplier, does not belong to a strongly branded nationwide network and is not part of a QFE or some arrangement where they get access to discounted services and support.
Greenslade suggests single operator financial advisers need to:
- Decide if they want to be in business for the next five years or longer and if so, start the restructure process now. This could involve co-location, joint venture, merger, acquisition or eventually a roll up. The timing and type of structure will be determined by the motivation of the adviser and their current business situation.
- Move away from valuing their business on a multiple of recurring revenue and ultimately move to an EBIT multiple. However, this could take a number of years to achieve as EBIT is only applicable if the business has sufficient scale to generate a realistic profit after all costs and salaries.
- Accept that at present, business valuation multiples have fallen and to revive these, advisers need to get their businesses fully compliant, reduce key person risk and drive substantial efficiencies within the business.
- Have a positive open mind to collaborative change - be that with a product supplier within a QFE or with peers in a branded non-aligned structure.
- Opportunities come to those who seize them and there will be numerous fantastic opportunities over the next 12 months to acquire books of business.
- Join or become a fantastic recognised and respected brand. Such an alignment will assist in new client generation and existing client retention.
Download a copy of David’s presentation below.
