The FCA has recently reported that 15% of Regulated Firms could fail, will you?

The FCA has recently reported that 15% of Regulated Firms could fail, but could it impact you? The answer is probably yes or should we say you might choose it to! For those willing to grasp the moment this situation can create real opportunities…

The FCA are currently worried about the IFA firms that have historically earned a large proportion of their income from the sale of (protection) products, usually from new clients. At present new clients are few and far between due to a lack of confidence in the future caused by the COVID 19 . One of our established IFA clients has seen a drop of over 70% in their initial income in 2020, and this will be reflected across IFA businesses throughout the country. This is why the FCA are regularly sending out impact survey questionnaires.

Yet for firms concentrating on growing the wealth of their existing clients the future has never looked better. Low interest rates and threats of increased tax rates mean individuals now more than ever need help to “invest” their money wherever it can get the best return (based on their risk profile and timescales.)

Throw into this mix an ageing IFA workforce with not enough individual IFA’s in their late 30s to early 50s coming through to buy out older IFA owners and you might think it is time to go into hibernation. But hiding is never the best option. As IFA’s you will know the best returns come from longer term planning and getting into investments when they are not already flavour of the month.

If you are an IFA firm that looking to expand during this period, here is some food for thought:

  1. Buying out partners that want to retire (or part retire) there is money out there to fund partner buyouts! And interest rates are relatively low at the present.
  2. Absorbing some smaller, younger IFA firms? Bringing in new experience, probably with younger clients and who can provide opportunities for succession in 5 to 15 years. They will come with some following so a deal is likely to be a negotiation between fees brought in and income the individual wants in the short term. These individuals will know it is not always greener on the other side, they will have some experience of managing a business (that will be useful now and in the future). It will give you the opportunity to look at what you do again and an impetus to freshen things up.

However, for those younger firms now is probably a time of tightening the belt. Remember, there is funding out there if you have a good business and plan. This is the time to work at planning what you do and who with. On the other hand, what about perhaps sacrificing the concept of running your own business to “merge” with a larger operation where the future is different but may be brighter? However it is really important to be aware of cultural differences. Culture eats strategy every time. Doing it right, not doing it quickly needs to be the motto.

Having external help is always useful because they will have been through the situation much more often than you will. An external advisor will help you identify your options and quantify the best ones especially if there are different views within the ownership of the firm. They will understand the logistics and tax implications of a merger or acquisition. They’ll also have more and different connections to funders than you will have. Most importantly, they will help you step back from the emotions of the situation which is crucial.

Uncertainty and change bring with them opportunities. Are you ready to grasp those opportunities? If you are, we would suggest that you will benefit from an external voice with experience in the industry and who can help you navigate the details and issues of FCA regulation and ongoing insurance while focusing you on the bigger picture.

We recognise that even trying to voice the current situation takes time which is why we offer a 2 hour free initial discussion. If this would be of interest please contact us today.