We are, therefore, seeing more IFA businesses moving away from self-employed structures towards employed models. Whilst some may say it makes the sector potentially less “entrepreneurial”, it does provide opportunities of its own in terms of greater job security for advisers and a move towards employee ownership models, examples of which we have seen in recent years with both Paradigm Norton and Ovation Finance being transferred to employee ownership trusts. Even if a firm is able to successfully negotiate succession planning, the ongoing challenges and threats still exist. As we have seen in the legal sector, it is likely that smaller IFA businesses will find it harder to remain viable as PI costs rise, and ever greater resources are required for compliance and investment in technology. As such, those firms wishing to remain independent will either need to grow to meet these challenges or collaborate with other similar sized firms either informally or via mergers between firms.
Opportunity Knocks
So, if IFA businesses can meet the various challenges which may threaten their long term survival, what opportunities do they have?
As the need for financial planning advice increases across generations, these opportunities are there. IFA businesses now play a key role alongside solicitors and accountants in providing holistic advice to individual, corporate and business owner clients. We have seen a big push by IFA businesses in recent years to engage particularly with business owners as well as offering more traditional wealth management advice to older, high net worth individuals.
Smaller independent IFA businesses may still have an advantage over larger competitors in terms of providing personalised bespoke advice tailored to the requirements of individual clients and they will need to capitalise upon this.
The inevitable shift in demographics causing wealth to be passed down to younger generations will require IFA businesses to adapt to the needs of younger clients. Those that grasp this and use technology to steal a march over competitors will no doubt see new opportunities for growth.
In conclusion, there are threats and opportunities for IFA businesses in, perhaps, equal measure. Firms that are able to make key strategic decisions early and adapt to the changing demands of the profession, may have every opportunity to thrive. IFA business owners should start by undertaking a review of medium to long term business plans and consider the options open to them. Some form of disposal may be inevitable at some point in the future and the impact of a sale upon a business should not be underestimated. Advance planning should help to mitigate the impact and ensure a successful long term future for the business.
About Stephens Scown
Stephens Scown has over 300 staff, including more than 50 partners, across its offices in Exeter, Truro and St Austell. The firm has been ranked for four consecutive years in the Sunday Times 100 Best Companies to Work For.
