"A princely way of looking at succession issues" "A princely way of looking at succession issues"

04 Oct 2017 Ken Davy

Seeing all the stories about Prince George starting school set me thinking about longevity and business succession issues for financial advisers.

As the great grandson of Queen Elizabeth, five-year-old George will be groomed to assume the crown. While many years away, this highlights the long term nature of dynasties. Not something you might think applicable to financial advice firms. However, many examples occur in banking and industry, particularly on the continent, where businesses are often passed through the generations via trusts.

Perhaps not practical for most financial advisers, but the reality is that clients are increasingly going to need, and demand, a continuing service after their original adviser has retired. The challenge for advisers is how to give clients confidence that their interests will be protected when this happens.

Before pension freedoms, a client retiring with a substantial pension fund would buy an annuity to secure their income, leaving little need for further advice. However, today the retiree is likely to opt for a drawdown, and the continuing need for professional financial advice becomes self-evident.

Clients are increasingly going to need, and demand, a continuing service long after their original adviser has retired
Confronting this challenge is obviously going to be most difficult for sole practitioners. They too will want to retire, but clients might be reluctant to engage with a new adviser at such a critical time in their lives.

The close personal service and trust, which has been the adviser’s strength, then becomes an inhibitor with regard to both the business value and any new relationship. For a small practice, selling up overnight will rarely produce a satisfactory outcome for either clients or advisers.

Most advisers want the best for their clients as well as for themselves, so I believe the solution lies in the adviser planning at least three years ahead of their own retirement. Advance planning enables the retiring adviser – especially when supported by a larger organisation they trust – to link with a younger practitioner who, over time, can be introduced to clients.

This leads to a better return for the retiring adviser while ensuring the long-term interests of their clients are protected in a continuing trusted relationship. Not quite the generational transfer that Prince George can look forward to, but certainly a massive improvement for both adviser and clients on some of the so-called acquisition deals being offered to advisers in the current market.

Ken Davy is chairman of The SimplyBiz Group


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