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What Makes a Business Ready to Buy or Sell? · Adeptli's Podcast

• 0:10
  SPEAKER_00: Hi and welcome to the Adeptly Podcast.
• 0:13
  SPEAKER_00: At Adeptly, we work alongside advisors and advice firms, providing hands-on technical, operational, and strategic support to help them deliver good advice and run stronger businesses.
• 0:24
  SPEAKER_00: In this series, we explore the trends, challenges, and questions impacting financial advisors and advice firms across the UK, with practical insight from people working at the heart of the industry.
• 0:35
  SPEAKER_00: Clear thinking, real experience, and honest conversation.
• 0:39
  SPEAKER_00: Let's get into it.
• 0:40
  SPEAKER_04: Hello and welcome to another episode of the Adeptly Podcast.
• 0:44
  SPEAKER_04: Today, Julia and I are joined by Brian Swanson to discuss what makes MA activity work in the financial advice industry.
• 0:52
  SPEAKER_04: Brian has had a varied career from professional footballer and service in the military through to senior roles in financial advice, including the regional director for an international advice firm.
• 1:03
  SPEAKER_04: Today he works with firms preparing to acquire or even be acquired, helping them get ready for a transaction and supporting deals through to completion.
• 1:12
  SPEAKER_04: So, Brian, welcome to the podcast.
• 1:14
  SPEAKER_04: Thank you.
• 1:15
  SPEAKER_04: Thank you very much for joining us.
• 1:16
  SPEAKER_04: I've touched on it a little bit there in the introduction.
• 1:19
  SPEAKER_04: Just tell us a bit about your background, where you started out, and how you ended up in the financial services industry.
• 1:27
  SPEAKER_02: Well, you you touched, I played professional football for a couple of years after school.
• 1:31
  SPEAKER_02: Um had a had quite a serious injury, so was looking for the next thing to do, obviously, outside of football.
• 1:39
  SPEAKER_02: Um, and went into the military with a friend of mine's.
• 1:42
  SPEAKER_02: Well, a friend of mine's took me along, actually, um, because he wanted to join, and I ended up joining as well.
• 1:48
  SPEAKER_02: Then did probably about 16, 16 and a half years in the military.
• 1:53
  SPEAKER_02: Served here, there, and everywhere.
• 1:56
  SPEAKER_02: Um, that obviously comes to an end after a period of time, and was looking what what was going to be the next thing to do.
• 2:04
  SPEAKER_02: So, my first my first role out of the Air Force was in recruitment, actually, for a financial services recruitment company, and that just kind of led on to the next thing, to the next thing.
• 2:14
  SPEAKER_02: Um, then ended up moving moving cities a couple of times.
• 2:19
  SPEAKER_02: Um, ended up then in Manchester, where then I had a call centre where a business partner might, we had two call centres actually, one in Manchester, one in Liverpool, when you could still cold call people.
• 2:32
  SPEAKER_02: Um, GDPR wasn't a thing then.
• 2:35
  SPEAKER_02: Um and we we provided leads for mortgage brokers initially and then for financial advisers.
• 2:41
  SPEAKER_02: Realised quite quickly there was more money to be made from the financial advice side, and and the the appointments were more in-depth for the financial advisors.
• 2:49
  SPEAKER_02: Obviously, they wanted more information than a mortgage broker once.
• 2:52
  SPEAKER_02: Um, so we decided then that we'd set up a small financial advisory firm in Manchester.
• 2:58
  SPEAKER_02: I went and sort of did my exams.
• 3:01
  SPEAKER_02: And then fast forward probably three, three, four years, then got offered an opportunity to go and work in Russia, which I'd always wanted to do since I was a kid, which is a different story.
• 3:12
  SPEAKER_02: But um I think when I when I was a kid, do you know like when you first you first get into understand where you are in the world?
• 3:21
  SPEAKER_02: I'm talking like five, six years old, and you start school, um, and we were doing something to do with geography in school.
• 3:30
  SPEAKER_02: And I went home and the teacher had showed us obviously a map of the world.
• 3:33
  SPEAKER_02: I went home and asked my dad at the time Um where where my gran lived, my mum's mum, and she was from Dublin, so he got out.
• 3:42
  SPEAKER_02: There's no internet obviously back then because I'm that old, and he got out the the map from the Encyclopedia Britannica, which I think every household had, didn't they, back then?
• 3:52
  SPEAKER_02: Um, and was saying, right, where are we, kind of thing with the map of the world.
• 3:54
  SPEAKER_02: And I was like, Oh, we're here, and he goes, Right, your granny's here, pointing to Dublin.
• 3:58
  SPEAKER_02: I was like, All right.
• 3:59
  SPEAKER_02: I said, What's that?
• 4:00
  SPEAKER_02: And he was like, That's Africa, and I've and I've never to it makes me laugh, God bless we're not here now, my dad, but it's it'll never leave my head.
• 4:08
  SPEAKER_02: He went, he went, That's Africa, that's America, that's France, that's Germany, the rest of that's Russia, and that was the end of the conversation.
• 4:15
  SPEAKER_02: Okay, and Russia, Russia was obviously the USSR at that point, so it was a lot bigger.
• 4:20
  SPEAKER_02: And I always just thought, I said to him, No, no, can we visit Russia?
• 4:23
  SPEAKER_02: And he went, No.
• 4:25
  SPEAKER_02: But I don't know if he didn't know why or didn't want to explain it to a five-year-old.
• 4:29
  SPEAKER_02: Um, and I said, I was like, why not?
• 4:30
  SPEAKER_02: He said, We just can't.
• 4:31
  SPEAKER_02: And then when I joined the Air Force, I was in Germany for four years, two years where the wall was still up, two years after the wall came down.
• 4:39
  SPEAKER_02: Still couldn't go to Russia because I was in the Air Force.
• 4:42
  SPEAKER_02: Um, so when I left the Air Force and had developed my career a little bit, I'd come to approach and said, Would you like to go to work in one of our offices abroad?
• 4:50
  SPEAKER_02: And they had 70 different countries.
• 4:53
  SPEAKER_02: Went to the induction process in London, and everybody else there knew which office they wanted to go to, apart from me.
• 5:00
  SPEAKER_02: And I said, Oh, can I go to the Moscow office?
• 5:02
  SPEAKER_02: And they were like, Yeah, if you want.
• 5:05
  SPEAKER_02: So, and and in my head, I was thinking, right, I'm just gonna go there for three months, get a three-month feasa, go for three months, come back, carry on with the call centre.
• 5:13
  SPEAKER_02: Um, and I went and then kind of things escalated.
• 5:16
  SPEAKER_02: I ended up being there for six, seven years.
• 5:19
  SPEAKER_04: Wow.
• 5:19
  SPEAKER_02: And then came back, yeah, yeah, very well.
• 5:22
  SPEAKER_04: And was and was it what you expected it to be?
• 5:25
  SPEAKER_02: Um it's a good question, Jimmy.
• 5:30
  SPEAKER_02: I'd say I think I I expected I expected what the work was gonna be because I had a friend of a friend who already worked for the company and and he'd arranged for me to speak to him, and he'd been there a few years.
• 5:41
  SPEAKER_02: So as usual, these offshore finance advisors from selling you the dream on, they're telling you you're gonna get 50 leads a week and three assistants and blah blah blah blah blah.
• 5:50
  SPEAKER_02: Um, and this guy said you're gonna get none of that.
• 5:53
  SPEAKER_02: He said you're gonna get a desk and you'll have to pay somebody to go and get you a sim card for Moscow, and then you just have to crack on.
• 5:59
  SPEAKER_02: So I I knew that and I was expecting that.
• 6:02
  SPEAKER_02: Um, I think the city surprised me how big the city was, how diverse it is in terms of the rich and the poor, or or the well-off and the poor.
• 6:13
  SPEAKER_02: They have we have kind of in this country, as we always think, we have lower, middle, and upper class, don't we?
• 6:19
  SPEAKER_02: The kind of three categories, and I know you get high net worth and ultra-high net worth and stuff, but they have like three different levels of middle class and different levels of high net worth than ultra-high net worth and mega ultra high net worth, like Abramovich and all those kind of guys.
• 6:33
  SPEAKER_02: Um, but the weather surprised me because I just expected it was going to be cold, which it was from October through to May.
• 6:42
  SPEAKER_02: But and you get three months in the summer where it's 30 plus degrees.
• 6:47
  SPEAKER_02: And you're just not ready for that.
• 6:49
  SPEAKER_02: Or I wasn't ready for that.
• 6:50
  SPEAKER_02: I'm like, yeah, what's going on here?
• 6:52
  SPEAKER_02: And because it's such a big city, so it's overcrowded, really.
• 6:55
  SPEAKER_02: It's overcrowded.
• 6:57
  SPEAKER_02: But it was I I learned a lot.
• 6:58
  SPEAKER_02: I learned a lot about being an advisor there, actually, and then and then quickly with the with the firm that I went to work for, the second firm I went to work for, learned a lot then about how business runs, etc.
• 7:10
  SPEAKER_02: A finance advice business over multiple cities and multiple countries.
• 7:14
  SPEAKER_02: But yeah, it was a it was an experience.
• 7:16
  SPEAKER_02: It was kind of one of the experiences I think where at the time you think this is amazing because you're you're meeting loads of different clients and making a really nice living, but you're really, really millions of miles away from anything that's kind of normal and western, really.
• 7:34
  SPEAKER_02: Um, and there's a lot of expats there as well.
• 7:36
  SPEAKER_02: Well, there was, I would imagine there's not many now, but um yeah, it was a it was an experience.
• 7:42
  SPEAKER_02: I think looking back, you think how did I manage six and a bit years of that?
• 7:47
  SPEAKER_04: But at the time it just kind of went really quickly, and that's been a bit of a focus on the past now, focus a bit more on today.
• 7:55
  SPEAKER_04: Well, what do you find yourself up to these days?
• 7:59
  SPEAKER_02: Speaking to owners and founders and advisors constantly, constantly about um MA and about scale.
• 8:07
  SPEAKER_02: We were just talking there about people trying to scale businesses, and there's I think there's a big there's a big change now.
• 8:14
  SPEAKER_02: There there always was, if you were selling a business, maybe maybe even as recently as five, six years ago, 99% of the tran 99% of the transaction would be advisor to advisor, wouldn't it?
• 8:29
  SPEAKER_02: It'd be you, James, you know, I'm selling my book and Julius, you know, I just live two towns along, I'll buy it off you.
• 8:35
  SPEAKER_02: I'll buy the clients off you, and we'll we'll do a deal.
• 8:37
  SPEAKER_02: Now it's PE driven.
• 8:39
  SPEAKER_02: Everything's PE driven.
• 8:40
  SPEAKER_02: There's there's still a part of where it's advisor to advisor, but most of it seems to be PE driven now.
• 8:47
  SPEAKER_02: Um which is good and bad, I think, but a lot of the the constant conversation I have with probably smaller businesses, maybe 50 mil to 500 mil under management, they're not ready.
• 9:01
  SPEAKER_02: They're not they're not ready because everyone in my in my experience, everyone should be thinking about a sale from day dot, really, because they're they're gonna sell, aren't they?
• 9:11
  SPEAKER_02: And in this industry, you're not just gonna get to 130 or 200 clients and then get to 65 or whatever the magic number is and say, right, thanks so much, clients.
• 9:21
  SPEAKER_02: I'm off.
• 9:22
  SPEAKER_02: Um go look on the FCA website and find yourself a broker or advice advisor, sorry, that lives nearby.
• 9:28
  SPEAKER_02: It's a tangible asset for you to then to look after the clients to pass them on to somebody that you trust, and also for you to to make a little bit of money from your your life's work, I suppose.
• 9:38
  SPEAKER_02: Um, but so many, so many people I speak to are just not ready.
• 9:43
  SPEAKER_04: And if you look at what you're doing today, which do you think of your football, your military, your core centre flows most into how you operate today and you've learned from those other careers and how she do your job?
• 10:00
  SPEAKER_04: Is it an amalgamation of three of them?
• 10:02
  SPEAKER_04: Is that one which stands out more for you?
• 10:05
  SPEAKER_02: I I think you it's probably an amalgamation of all of all of them, really.
• 10:08
  SPEAKER_02: I mean, certainly with football and the military, both of those worlds teach you it's you can't do anything on your own.
• 10:14
  SPEAKER_02: So it's it's a team, it's a team sport, isn't it?
• 10:17
  SPEAKER_02: And and and that feeds into to being an advisor as well.
• 10:21
  SPEAKER_02: I think you can't you can't do it on your own, it's a team game, isn't it?
• 10:23
  SPEAKER_02: You need everybody else backing you up, your your para planners and and whatever else.
• 10:27
  SPEAKER_02: But um, and and that kind of goes into the military.
• 10:31
  SPEAKER_02: I think sometimes you get minimal information and you've got to work through what you've got and make a decision and and and make a good decision under time pressure.
• 10:41
  SPEAKER_02: Um and and sometimes you make the right mistake, the right decision, sometimes you make the wrong decision, don't you?
• 10:48
  SPEAKER_02: Other times I think um with foot with football it teaches you something else, doesn't it?
• 10:52
  SPEAKER_02: People under pressure to perform.
• 10:55
  SPEAKER_02: Um it's never a one-man band, is it?
• 10:58
  SPEAKER_02: Because if you've got one player constantly pulling the team through, like we've spoken of this before, I made like Gerard or somebody like that, or or Bruce.
• 11:08
  SPEAKER_02: Or right Fernandez or Paul Scores or somebody like that, constantly pulling the team through by the scruff of the neck, eventually that's that's that's going to come to a head, isn't it?
• 11:17
  SPEAKER_02: Um but it it teaches you, I suppose, that there's if there's genuine depth in the squad, a squad having a bad day one day is not necessarily a bad team.
• 11:26
  SPEAKER_02: They've just had a bad day, haven't they?
• 11:27
  SPEAKER_02: Um and I think probably the kind of single thing that's been been drilled into me is that just because the founder of the business is having a bad day, it doesn't mean to say that he's a bad founder or she's a bad founder of that business, just means they're having a bad day.
• 11:43
  SPEAKER_01: We were talking earlier.
• 11:44
  SPEAKER_01: Do you think the the size of the team that is required around an advisor is has grown?
• 11:52
  SPEAKER_01: You know, it used to be an advisor kind of did everything, whereas now you need a power planner, you need an administrator, so many other extra roles.
• 12:00
  SPEAKER_01: Is that time that's changed that, or is people just not adequately resourced to start with?
• 12:05
  SPEAKER_02: Just I think it may be a bit of both again, Julia.
• 12:08
  SPEAKER_02: Do you think it's because I think since probably we all started, and I know we'd kind of vary in age, but we've all been in this game for a while, haven't we?
• 12:15
  SPEAKER_02: So much less.
• 12:16
  SPEAKER_01: You think we're the same age.
• 12:18
  SPEAKER_01: Alright, alright.
• 12:18
  SPEAKER_02: I meant I meant me and Jamie.
• 12:22
  SPEAKER_02: But but there is there's there's there's more of an admin burden now, isn't there, than there was 25 years ago or 20 years ago, or whatever it is.
• 12:32
  SPEAKER_02: There's a much bigger admin burden.
• 12:33
  SPEAKER_02: Um and and I think more firms are trying to entice better advisors to come in the center, we'll do all the other stuff for you.
• 12:46
  SPEAKER_02: You just go and see clients and bring new business in.
• 12:49
  SPEAKER_02: Because everyone's chasing our so it seems for the recruitment firms that I speak to, everyone's chasing the top advisors or the good advisors or the chartered advisors who can bring in new business as well as bring in their clients.
• 13:03
  SPEAKER_02: So to incentivize them, the the the big thing is listen, we'll provide you with some leads, we'll provide you with power planning, we'll provide you with an admin person or an admin assistant.
• 13:13
  SPEAKER_02: Um, you just go and see clients.
• 13:15
  SPEAKER_04: And I think the reality is for a lot of advisors, that's one, the bit of the job they want to do, but two, also the bit of the job they're best skilled.
• 13:25
  SPEAKER_04: Yeah, of course.
• 13:26
  SPEAKER_04: It's often the skills which make you a good advisor are the exact same skills which mean you're not a good power planner or a good administrator.
• 13:35
  SPEAKER_02: Yeah, I think some somebody said to me once, um, I love administration, said no financial advisor ever.
• 13:42
  SPEAKER_02: Yeah, isn't it?
• 13:43
  SPEAKER_02: Because as as you just said then, Jamie, I think as an advisor, you get into being an advisor because probably you want to help people and you're good with people, and maybe good with numbers and and and the technical competence or whatever else.
• 13:59
  SPEAKER_02: You don't get into financial advice because you want to sit for three hours and write a suitability report or or to go and do all the rest of that nonsense that comes with it.
• 14:07
  SPEAKER_02: You want to be set in front of people, don't you?
• 14:08
  SPEAKER_02: And that's what makes you happy.
• 14:10
  SPEAKER_04: And you've you've obviously done the advice role.
• 14:15
  SPEAKER_04: How do you think that helps you now when you're in the MA space working with buyers and sellers?
• 14:20
  SPEAKER_04: Do you think that makes it easier for you than just a traditional MA broker?
• 14:27
  SPEAKER_02: Yeah, yeah.
• 14:28
  SPEAKER_02: I I think that I think the gap, the gap's a spreadsheet, isn't it?
• 14:31
  SPEAKER_02: So you're your normal broker, and I I was having this conversation yesterday at someone about I I I wouldn't define myself as a broker, really.
• 14:41
  SPEAKER_02: I'd define myself as an MA sort of consultant or specialist, whatever.
• 14:44
  SPEAKER_02: But most brokers, and I'm not going to be disrespectful to brokers, I have yet to meet one that's been an advisor or ran an advisory firm or ran multiple offices or managed even advisors.
• 14:56
  SPEAKER_02: They've they're all salespeople generally that have come from something else.
• 15:00
  SPEAKER_02: A lot from recruitment actually have come into that space.
• 15:04
  SPEAKER_02: So, and a lot of the time, a spreadsheet's a spreadsheet, isn't it?
• 15:07
  SPEAKER_02: So you put a spreadsheet in front of a broker and they'll be able to see the numbers, but they don't know what happens on a Tuesday morning in the office of an advice firm.
• 15:14
  SPEAKER_02: They don't know about the intricate little relationships or the informal relationships within a firm that keeps the business going.
• 15:20
  SPEAKER_02: They don't know the the pressure that maybe the owner or the founder's under or some of the team.
• 15:25
  SPEAKER_02: So they don't they don't know the behind the behind the scenes part, I suppose.
• 15:31
  SPEAKER_02: Um and I think that makes that makes a big difference because it's it's easy to underweight those kind of things.
• 15:37
  SPEAKER_02: If you know, if you're looking at a business and AUM's AUM, isn't it?
• 15:42
  SPEAKER_02: It doesn't matter how you look at it.
• 15:43
  SPEAKER_02: But if you're looking at AUM for a business where the the advice process is terrible, a lot of the historical files are are a bit sketchy because it's the owners done them on their own when they when they had to do all the points and the admin before they got a little bit bigger.
• 16:00
  SPEAKER_02: Um and and those are the things that break in due diligence or when someone comes in to look at it.
• 16:04
  SPEAKER_02: That's the first thing that that a buyer or an acquirer will spot.
• 16:08
  SPEAKER_02: Um and under then they they price that risk in, don't they?
• 16:13
  SPEAKER_02: And take that out of the business.
• 16:15
  SPEAKER_04: And it's it's obviously a good space for you to be in at the moment because the amount of activity we're seeing in MA is you know, all the statue on your you know, new market advisors, citywide, their articles all the time.
• 16:28
  SPEAKER_04: So and so's bought so-and-so, so-and-so's up for sale, this private equity that, this private, and everyone has their view on why that is.
• 16:37
  SPEAKER_04: Some is succession, people wanting to more people, you know, old advice population looking to get out, others more regulation very much like Dave.
• 16:48
  SPEAKER_04: Um regulation getting harder, opportunity created by the advice gap.
• 16:55
  SPEAKER_04: Well, what do you think it is?
• 16:57
  SPEAKER_02: I think it's probably all of it, but not an equal measure.
• 17:00
  SPEAKER_02: Okay, I think succession's been the continual driver, isn't it, for years and years and years, and we mentioned that at the start.
• 17:07
  SPEAKER_02: And we've forever been told the average age of an advisor in the UK is now 58, 59, 61, whatever it is.
• 17:14
  SPEAKER_04: Well, then it seems to have been that age for the past 15, 20 years.
• 17:17
  SPEAKER_02: I've seen I seen I've seen a podcast the other week and somebody else was saying, Oh, the average age is actually 37.
• 17:23
  SPEAKER_02: So you don't know what to believe do you unless you who you who you're speaking to.
• 17:26
  SPEAKER_02: But I think um a large a large slice of advisor firms are owned by people approaching that age, aren't they?
• 17:35
  SPEAKER_02: Because and and especially the smaller ones again, and that that um sort of one man, two-man, three women band sort of thing, where they're up to five, six hundred million under management.
• 17:47
  SPEAKER_02: Regulation and and rising compliance costs, all all that kind of thing is driving it as well.
• 17:52
  SPEAKER_02: Because if you are a smaller firm, you can't afford that.
• 17:54
  SPEAKER_02: So then it's right, do I go and join a network?
• 17:59
  SPEAKER_02: Do I do I go to a bigger firm locally and say, actually, can I come and join you with these clients and take and make get get the benefit from there what they've invested, or do you invest a massive chunk of money?
• 18:12
  SPEAKER_02: But if you're already at that in your late 50s or early 60s, you're probably thinking, actually, I'll just sell it.
• 18:17
  SPEAKER_02: I'll just sell it.
• 18:18
  SPEAKER_02: P PE's come in, um, obviously, a good few years ago and it's come into the industry and it's making it it's it's made the the precursor for what a business should look like to be sold better.
• 18:35
  SPEAKER_02: So people are able to prepare better if they want the PE money.
• 18:38
  SPEAKER_02: It's made the multiples higher and their processes are quicker because PE by the nature of P is what they do is buy businesses.
• 18:45
  SPEAKER_02: So they've got a strict process of how they do that and how quickly they can do that.
• 18:50
  SPEAKER_02: Most, if not all, financial advisors, it's the first, only, and last time they'll sell a business, yeah, isn't it?
• 18:57
  SPEAKER_02: So they're about what's happened to you, and the PE companies go and sign that, do that, do this, gone, bang.
• 19:03
  SPEAKER_04: Because a lot of them are accidental business owners at the end.
• 19:05
  SPEAKER_04: Yeah, exactly.
• 19:06
  SPEAKER_04: Really good advisor have built a really good business without ever having that intention to do that.
• 19:12
  SPEAKER_02: Yeah.
• 19:12
  SPEAKER_02: I think I think what what what you see across all the the sort of mandates that I'm working on at the minute is that the PE companies are coming in, so they're raising they're raising the barrier for what kind of businesses they want to buy.
• 19:26
  SPEAKER_02: I won't, I don't, are we naming businesses on here or not?
• 19:30
  SPEAKER_02: I I started working with a really, really large company a few years ago, literally three years ago, and they said to me when I first spoke to them, we're only interested in businesses that have 300 million plus AUM.
• 19:42
  SPEAKER_02: Last year they said to me, we'd want to speak to them that's got less than a billion AUM.
• 19:47
  SPEAKER_02: So that's what PE's done to the industry.
• 19:50
  SPEAKER_02: But the the newcomers coming in who are maybe disruptors, younger advisors who are thinking, actually, I'm going to get DA and do it on my own.
• 19:58
  SPEAKER_02: That's more of a difference, what they're looking at as a cultural fit, what they can offer to the clients.
• 20:03
  SPEAKER_02: Whereas the PE firms are just looking for another multiple to sell it again, like AFH or their PE deals came to an end, isn't it?
• 20:11
  SPEAKER_02: And they're they're in the process of doing another one.
• 20:13
  SPEAKER_02: So yeah, I think I think it's all um, but it's spread about.
• 20:19
  SPEAKER_02: Succession will always be the main driver thing because as as advisors get to a certain age, but there's more, there's definitely more PE stuff and more people fed up, aren't they?
• 20:29
  SPEAKER_02: Like we you mentioned the the accidental business owners who who maybe worked for the PRU however many years ago, and then in two was it 2013, RDR?
• 20:40
  SPEAKER_02: Run time, wasn't it?
• 20:42
  SPEAKER_02: RDR when they said, right, you've got to go do some exams now, and they're like, oh bloody hell, go and do some exams and come back and then go, right, I'm gonna get directly authorised.
• 20:49
  SPEAKER_02: And the FCA phone them up the next day and say, right, you're directly authorised, and it takes two years, doesn't it?
• 20:55
  SPEAKER_02: Um and then they've they've got to that critical mass with advisors, maybe 120, 130 clients, get a para planner.
• 21:03
  SPEAKER_02: Paraplanner gets poured, give them some of the clients, get another paraplanner.
• 21:08
  SPEAKER_02: Next next thing they know, they've got five advisors, and they're not advised anymore because they're managing the advisors, doing all the the increased administration bud from the FCA, the Gabriel reports, audits, everything else.
• 21:21
  SPEAKER_02: Um, and nothing, and then consumer duties hit, hasn't it?
• 21:24
  SPEAKER_02: No, yeah, I've had enough.
• 21:25
  SPEAKER_02: I'm gone.
• 21:26
  SPEAKER_04: And do you think we've touched there about private equity is definitely creating bigger businesses and they're looking for the economies of scale?
• 21:36
  SPEAKER_04: Do you think would you have a view on if it's creating better businesses?
• 21:44
  SPEAKER_02: Um it's creating bigger businesses.
• 21:47
  SPEAKER_02: I don't I don't know if it's creating I don't know if it's creating better businesses.
• 21:50
  SPEAKER_02: I think it's it's changed the pace and the pricing of the market, hasn't it?
• 21:54
  SPEAKER_02: And it's brought discipline into some places within that.
• 21:57
  SPEAKER_02: But I think if you're buying a business.
• 22:00
  SPEAKER_02: that the processes weren't great anyway and and and the the advisors are all doing their own thing within that even though consumer duty is kicked in you're just buying more AUM aren't you're not necessarily buying a bigger business and if if it's if it comes back to then the the clients then can they see a change or is it just historical because the founder went oh this is how we've done it and we've kept doing it and if the clients can't see a difference in in the advice process I think it's it's just creating bigger business but it comes down to what the acquire does I suppose after completion doesn't it and and and I don't want to be disparaging about PE but a lot of PE companies are in it for three five years only and it's like right buy that one buy that one buy that one right now we've got seven billion AUM who wants to buy this yeah and they're not really bothering they're putting more and more pressure on the advisors and more pressure on the process and more pressure on the clients they're not they're not looking to create the next hundred year company.
• 23:01
  SPEAKER_04: No they're they're looking for their money in the three to very quickly very quickly yeah and I don't know I think for me one of the I think outcomes of it might be or challenges of it is some of them are losing that direct one-to-one advisor client relationship we we know and we've talked in previous podcasts about sort of underpins our industry and is what a lot of clients are looking for.
• 23:27
  SPEAKER_02: I think what we might find possibly some of these larger scaled PE back businesses will become maybe more for the mass market and we will see again a rise of the smaller local businesses for those people who want a truly personalised service have slightly more niche needs and it works for the industry that there are still smaller firms to deal with them while the PE will hoover up the simpler I don't yeah I don't disagree I think the FCA like bigger firms don't they make their life easier the FCE don't like smaller firms don't they and they certainly don't like um the uh like the AR kind of product they don't like that at all but I think my opinion obviously I think a lot of the PE firm PE back firms eventually PE will pull out I think and in five or six years they'll be like yeah this this is we're not making the margins we thought we're going to make here because consumer duty is forcing people now to have a charging structure throughout throughout the firm and I think the the FCA'll come back maybe in a couple of years again my opinion to say right now this is what you can charge for a pension this is what you can charge for an ICE this is what you can charge for that PE will be gone then and and already speaking to um some of the recruitment firms that I know they're saying a lot of the what they would class as good advisors really experienced really qualified really technically competent are moving away from big firms and networks saying I don't feel like I'm serving my clients correctly at this firm try and find me a smaller bit and they're taking they're preparing or prepared sorry to take a little bit of hit financially to go somewhere where they can offer more for the clients well I think you have to look at what's happened in banking don't you you know if you wanted mainstream financial advice you could go into the bank and then people started to say I just feel like a number I need to feel like a person so I'm going to go and see someone where where I can have a proper personal relationship where I see the same advisor every time because at the bank every time I went in it was a different person and now that history's repeating itself with the consolidation and clients will do the same it's like I don't want to be a number I need one to one financial advice is quite personal.
• 25:38
  SPEAKER_01: We were talking a couple of days ago about the fact that you know there are various services not just financial advice but whether it's your hairdresser or your dentist you travel to go to the same one because you've got that relationship and that's actually what you value.
• 25:51
  SPEAKER_02: Yeah you don't want to see a different person absolutely all the time it's interesting that the banks are coming back in again isn't it like when that it's buying evening partners and and and a few others and it and it'll it'll go the same way I think it's it's just cyclical isn't it so they'll come in for a bit make as much money as they can the bank and then real then the customers will go again.
• 26:10
  SPEAKER_02: Okay.
• 26:10
  SPEAKER_02: But I think the banks can offer at scale cheaper products at the moment which is why they could see the margin.
• 26:17
  SPEAKER_04: Yeah and I think we might see some of that cyclical nature with advisors as well where they've sold out joined one of these bigger firms and then actually not only to your point about wanting to deliver for their clients better but actually realize we don't want to be in a network where we're being managed and we're being told what to do.
• 26:35
  SPEAKER_04: We want to go back to that autonomy and they've got the experience now of having done it once going to it again and you can see that with some of the senior managers moving around different places in and out and setting up new things and I don't think the smaller advice firms will be any different personally or certainly not all of them.
• 26:54
  SPEAKER_02: No I I completely agree you you can see that that pattern actually and offshore advice so previously offshore advice was was like the wild west really when I went offshore um in 2010 I think 2010 2011 I went into an office at the time 70 70 something advisors four of us were UK qualified and the so the rest aren't advisors but they were calling themselves advisors now all of these companies have realized it's gone full circle now and they're saying actually we can offer you a nicer lifestyle somewhere else to the advisor you can still deal with UK clients because we've gone certification and registration here here here and here you could come and work for us and manage clients all around the world and live in Portugal or live in Dubai or or whatever you want and live Germany and do all that and and that that goes in all those you see if you watch movement of some of the key figures like I I obviously know a lot of people that that worked on that offshore but I was offshore and you just see them jump every two years somewhere else jump somewhere else jump somewhere else because this this company's doing something that these weren't and they're offering global advice or I can deal with clients in Australia with these because they've got Australian license and etc so I think you you'd start to see that more and more assume mentioned with it with advisors moving to what they deem to be better firms as opposed to bigger firms um and then the the firms themselves will go actually we'll they'll offer more maybe not autonomy but more flexibility for the advisors and obviously you've worked in an international advice firm across multiple countries.
• 28:37
  SPEAKER_02: It's not something you typically see the UK wealth managers or financial advice networks looking to do I spec you've got Hoxton SJP have a couple of overseas territories do you see that being something which PE equity might drive a bit more that there's more internationally I think there's a there's there's a few um there's a few of those firms that have got PE barking um already or have had PE barking to grow and get to that stage and and I think it's it's probably it's hard to say but they're getting bigger aren't they like you mentioned Hoxton Chris has done a phenomenal job there and how quickly they've grown and the size they've grown and the reputation they've got um Titan are down at skybound they're trying to do it now they've they've brought a big header across from um other companies and I think PE will look at that and say right actually instead of just having a little piece of the UK market these guys are in the UK they're they're using the SciSec licenses to get into Europe they've they've got Australian clients they've got series 65 advisors that are dealing with clients in America so you might even get American PE backed I'm not seeing loads of it at the moment but I think if those firms keep getting bigger and then more and more um appealing to UK advisors or UK qualified advisors who maybe want to grow again because you get to I know with you Jamie you you got chartered really young didn't you say right what's next?
• 30:08
  SPEAKER_02: Yeah isn't it what if I'm gonna still could professionally develop and there's more and more you see on LinkedIn don't you more and more advisors now doing their their charter advisor before they're 30 which is still an achievement I think a great achievement they're thinking right what now I'm gonna do my series 65 or I'll go and do this one and that one then think oh I could get clients in America now or I could do so it become more and more appealing for advisors wherever those businesses are whether they're in the UK or whether they're in Abu Dhabi or Portugal or somewhere else to sit and go actually I can manage clients in three different four different continents now.
• 30:42
  SPEAKER_04: And if we move a bit to talking more about the value in an advice firm and how that process works.
• 30:49
  SPEAKER_04: Yeah um can you talk to us about how a deal might typically be structured or how evaluation of advice firm might look because I think for a lot of advisors sometimes because they don't think about selling their business like they will all have a figure in their head but whether it's realistic or not is I think different question.
• 31:10
  SPEAKER_02: The the the figure in their head is is the thing that you come across every single day and it's either a made up figure that I used to when I first started doing this everybody at sport to say I want a million yeah I want a million whether they had 5000 under management or 500 million I want a million how much the Jen last year 72 grand right was that a badger no that's my best year ever nobody's giving you a million I think the the biggest the the biggest sort of hidden value destroyer if you like in a firm is founder dependency.
• 31:49
  SPEAKER_02: So if if and I always if it's a founder I'm speaking to or the or the board or whoever's running the firm say right what tell me what happens if you're not here for a month do you turn your phone on when you go on holiday how many times do you get a phone call from the office like that's that's not that's not a business that's that's your practice and everybody else is feeding into that it's not you'll you're the proposition and everybody else is is tagged into that.
• 32:17
  SPEAKER_02: So if the founder is is already and these are these are the businesses that get chosen when it comes to acquisition some companies approach them because they're not founder dependent the everyone in the business can speak to any of the clients the clients have bought into the proposition not just the advisor they obviously have to buy into the advisor initially right to to become a client but then it's okay very quickly let me introduce you to Jamie let me introduce to Dave let me introduce to Brian so that when they phone the office and and um Julia's not in I'll just speak to Jamie then rather than I'll phone back.
• 32:50
  SPEAKER_02: That's that's how our hierarchy is generally but yeah so and and it's typically there's there's there's massive massive swings in the valuations that if if we go ongoing to keep it simple value on ongoing at the minute it's anywhere between three and five and a half times sometimes six for for what you would class as a really good business not one that you could almost it's just pick the box up drop into the acquire business and everything runs fine that's the business that you're going to get the most money for acquirers as I mentioned because it's PE lot of PE they're very savvy in what they're looking at and the price risk in very very quickly right is the business founder dependent let me look at your files and and your your um your compliance report and your your historical files that's another risk what happens when you're not here that's another risk how many advisors are doing different things within the business that's another risk and it just keeps it just keeps chipping away but I think going back to what we said at the start if advisors have the mindset right I'm I'm gonna sell this one day whether it's in two years or 22 years if they have the mindset and build the business like that right don't have the business dependent on me have the have the business working without me and everybody knows.
• 34:11
  SPEAKER_02: So everybody's doing the same thing when they see a client the clients have bought and it's not some historical thing that the clients have just forgot to cancel but there's still 300 300 cases sat in the cupboard with clients that you've not spoken to for five years.
• 34:26
  SPEAKER_02: That's what devalue the business and and it's years before you sell not months people quite often I appreciate I should caveat that I appreciate that sometimes things happen and you need to sell yeah like a health event or God forbid something happened in the farm line you're like yeah I need to get out and go on that's that's then a conversation to have and say right this is going to be a fire sale but we need to get it sold so that you can go and do that or go and um recover or whatever.
• 34:54
  SPEAKER_02: But if you've got any time it's probably three years you need to look start looking three years out because then you can do a complete audit for yourself of the business actually if I walk away what happens because that's what I require a look at.
• 35:09
  SPEAKER_02: Do you think people in the business can actually see it though so you know if I was an advisor now and thinking yeah probably gonna sell in three or four years have I got the capability to actually look at my business and think yeah it's a bit finder dependent no some depends on the individual Julia I think and and I think a lot of advisors or and a lot of owners of of smaller advisory firms too busy being advisors yeah aren't they and and running caught up in the day to day yeah and it's and and especially if as we just mentioned the business it's dependent on them so they are the day to day all the time everybody's phoning them the a decision doesn't get made without oh we need to go speak to Julia um client phones and it's constantly you're in with another client I'll phone them back and that two hours that you're gonna have to yourself to do something else is now 50 minutes on the phone to that client that phoned because Donald Trump's got the wrong side of the bed this morning and and God all the nose is dropped so I think and and there's there's there's firms around I'd I do work with a firm um called Avanta partners and we'll go in and do that yes for a business um and you guys adeptly do that stuff as well and you go in and say look this is the case this this is prehistoric stop doing this do this this is a better system this is a better process so I think an answer to your question no because they're too busy running the business and it's just happened over time isn't it so it's not suddenly happened overnight it's been building and building and building yeah and and and that creates an issue then because what happens is when you when you get to that not always but when you get to that first block I suppose when you've got X amount of clients and think right I need some help now because I've got a hundred and something clients I've got a nice income but I'd like a bit more but I can't physically see any more clients now so then you bring someone else in and teach them how to teach them how you deal with clients.
• 37:13
  SPEAKER_02: Yeah you just compounded yeah and then the next person comes in and you haven't got time to teach them so the person that you taught teaches them it's that kind of Chinese whispers isn't it yeah yeah and then an acquirer comes in and goes right what's the advice process and you go it's this and and Jamie goes no it's not that's not what Dave taught me or that's not what Steve taught me or what is it then and it puts the acquirer off straight away because they're gonna have to fix that aren't they and with those um deals you know spoke around typically at the moment three to five five and a half times uh recurring revenue some advisors I speak to seem to think they get that walk away see you later in reality that's very very very rarely the case is it yeah I think there's not a single template for for the deals anymore but more and more now and again because PE have come in they've um they're they're more keen to do a longer earnout to keep the because obviously there's less attrition isn't there if you're keeping the owner or the founders of the business in the business for longer um and they but they they're they're offering a better consideration for that so that that component would be okay if you stay for three years instead of two years if you stay for three years we'll tie you into any profit over that time.
• 38:40
  SPEAKER_02: So they're now it gets longer and longer.
• 38:41
  SPEAKER_02: Some people as you as you said Jamie People right they get to heads of turbulence and go right we're going to give you a million for your business right bro when can I get it we'll finish paying you in five years sorry what?
• 38:52
  SPEAKER_01: Yeah no I want to go next week okay we'll give you 200 grand then oh how easy do you think it is for someone who's been running their own business and had complete autonomy to then be part of a bigger thing and actually have to be abiding by someone else's rule book because I've seen it go wrong quite a few times.
• 39:09
  SPEAKER_02: Yeah I think that's that's everything in life doesn't it I think I suppose it's slightly easier if there's a big check at the end yeah if you if you think and I and I do know what as well I've noticed I've I've noticed a change I don't know if you've noticed I've noticed a change in advisor behaviour since 2010 if you like when I first when I first started because advisor seller then they'll just like right how much thanks I'm gone don't care what happens to the clients not all of them yeah but a lot of them I'm not bothered what happens to the clients you you can have them and crack on and they just go there seems to be a complete mindset switch now where a lot of the advisors and it's sometimes the first well it's there's a high percentage it's the first thing advisors say to me they say right I've I've been told you can help me sell my business okay who would you like to sell to oh I don't know right what what would you like to happen to your clients or I'd like them to be looked after like I looked after them that's not going to happen because you've had 30 years looking after them and you know their kids and their grandkids and their dogs' names and you know when their birthdays are you've probably been to weddings christenings funerals um how about we find a firm that's that does similar to what your firm does so it has it has the same they use the same platform they've got the same providers they've maybe got a similar central investment proposition or not and it'll be easy for your clients to just continue while they build a relationship with the new advisor but I think there's there's always going to be that there's always going to be that bit where you're gonna lose clients and and they after after the deal because it's like well so used to dealing with Jamie or Julia and vice versa and then after the first annual review like oh that's not how Jamie done it.
• 40:57
  SPEAKER_01: I think that's a recollection of the industry though isn't it because it has changed over time that it used to be more transactional and now it is much more relationship based so what was happening in 2010 where people were selling what had been transactional based on products you're still selling products that you're doing before but now you know 16 years later after that you've got 16 years of relationships that have developed yeah and that's the thing and it's all it's all lifestyle financial planning now isn't it everybody's talking about lifestyle financial planning instead of asking oh how much do you earn people are asking what do you want to do your life yeah yeah how do you see your retirement rather than how much money do you want in retirement but I think that that whole client relationship piece is why the valuation of businesses in our industry is so tough because the inherent value in a lot of businesses is the client relationships which the individual who actually no longer wants to work in the business anymore has.
• 41:52
  SPEAKER_04: Yeah.
• 41:52
  SPEAKER_04: So it it is a really tricky conundrum isn't it about for that individual I want to get most money as possible from a business but with the buyer going but you're the thing which makes the business work.
• 42:05
  SPEAKER_04: Well you are processes yeah processes not might not be great there might be some compliance issues but at the end of the day the clients see that advisor.
• 42:15
  SPEAKER_02: I think I think now with the with the the the structures changing and and being more back end weighted there's still there's still a chunk if you like at the start to keep the seller incentivised to help with the the integration and and all that stuff and to reduce attrition but I think the the what the buyers don't want to do obviously is take on all the risk.
• 42:40
  SPEAKER_02: Yeah which is why they're saying well I can give you a hundred grand and you can go tomorrow or I can give you 700 grand but I need you to stay for three and a half years and make sure all the clients come across and once 80% of them have come across as as an example we'll give you profit on what's happened the last year and and and etc so so it's changed which is a sensible direction isn't it because that a lot a lot of the a lot of the the advisor on advisor deals there's massive attrition wasn't there yeah um because I don't like Julia or I don't like Jamie or I don't like Dave or I don't like Brian I'm gonna go and find myself a an advisor and you think I've just paid 100 grand for that and I've lost 600 clients in the first at the first annual review.
• 43:26
  SPEAKER_02: So the they're they're pricing that in to try and make sure that they're they're not just buying the EUM and that's that's an interesting point.
• 43:38
  SPEAKER_04: So with buyers the things and you know you talk to them we talk to them it's uh we're gonna do some financial due diligence so we're gonna look through the accounts and see if there's any disasters hidden in there.
• 43:52
  SPEAKER_04: We're gonna do some legal due diligence around how's the business set up was but then for some of them it's Stops there.
• 44:01
  SPEAKER_04: Whereas in our mind, we've when we work with firms, it's always been there is so much more you need to understand about this business than the balance sheet and the way it's set up.
• 44:11
  SPEAKER_04: What what's your view?
• 44:12
  SPEAKER_02: Advice quality and file standards.
• 44:15
  SPEAKER_02: Okay.
• 44:16
  SPEAKER_02: First and always.
• 44:17
  SPEAKER_02: Advice quality.
• 44:19
  SPEAKER_02: With the exception of the founder, how founder dependent, isn't it?
• 44:22
  SPEAKER_02: But but look at the advice quality, look at the look at the file standards, because that's where the risk is, isn't it?
• 44:28
  SPEAKER_02: Yeah.
• 44:28
  SPEAKER_02: That's where all the risk is.
• 44:30
  SPEAKER_02: And and generally that doesn't show up in due diligence.
• 44:33
  SPEAKER_04: Yeah.
• 44:35
  SPEAKER_02: So go and go and look at that first.
• 44:37
  SPEAKER_02: Um because it won't surface during financial and and um legal due diligence.
• 44:43
  SPEAKER_02: And then what the ongoing service actually looks like to the client.
• 44:47
  unknown: Yeah.
• 44:48
  SPEAKER_02: So if you say, oh, we've got 300 clients here, they get they get a review every year, what does that actually look like to them?
• 44:53
  SPEAKER_02: Is that are they getting what's promised on paper?
• 44:56
  SPEAKER_02: Or is it just what we're saying they get?
• 44:59
  SPEAKER_01: Do you think you have the right people doing the due diligence then?
• 45:02
  SPEAKER_01: Because if you're kind of the finance people, they're not necessarily in the position to analyse the quality of the advice, are they?
• 45:08
  SPEAKER_01: The people best able to do that are other advisers in the industry.
• 45:14
  SPEAKER_01: Exactly.
• 45:15
  SPEAKER_02: And this this is where I I kind of position myself not as a broker without again not being disparaged into brokers because I think they do they they do meaningful work and helping people sell their businesses and and getting them a fair price.
• 45:30
  SPEAKER_02: They they probably haggle more than I would haggle because they're completely commissioned, they only want commission to get so they're like, oh no, they want six times, yeah, but it's only worth three times.
• 45:40
  SPEAKER_02: Yeah, but they want five and a half times, they'll push and push and push and push.
• 45:44
  SPEAKER_02: Um but like we said, they're they're they're just looking at a spreadsheet that says AUM, they're not looking at oh, but oh, there's 90 clients on there that's 75.
• 45:53
  SPEAKER_02: Yeah, there's there's there's this going on, yeah.
• 45:56
  SPEAKER_02: Just the number of clients.
• 45:57
  SPEAKER_02: That's a 10 that's a 10 grand ICER.
• 45:59
  SPEAKER_02: Again, not to be disrespectful to 10 grand ICES, but um and and look at the the the depth and capability of the the team as well that you've got if you're getting by the team, if you're not just buying the clients, if you're keeping some of the team on as well, you need to check what what they look like um in the culture as well.
• 46:18
  SPEAKER_02: But I I would always go back to advice quality and file standards you need to look at first.
• 46:22
  SPEAKER_02: Because that's that's a massive risk, isn't it?
• 46:24
  SPEAKER_02: If the advice quality is poor, I nearly swore then.
• 46:27
  SPEAKER_02: If the advice quality, sorry, if the advice quality is sort of poor.
• 46:32
  SPEAKER_02: Yeah, well, yeah, um nothing's happened with your your investments this year, Mr.
• 46:39
  SPEAKER_02: Jones, see you next year, yeah, kind of thing, isn't it?
• 46:42
  SPEAKER_02: Yeah or how much do you earn, right?
• 46:44
  SPEAKER_02: Okay, put two grand on a pension every month and and I'll come back and see you're 67.
• 46:49
  SPEAKER_01: I mean there's all sorts of hidden risks, isn't there?
• 46:51
  SPEAKER_01: Because you you can look at a again, you can look and see right, there's a hundred clients, but actually if you find out that 15 of them are all from the same family, that in itself is a risk.
• 47:00
  SPEAKER_01: Because if you annoy one of them, it is 15% of the client bank.
• 47:04
  SPEAKER_02: I had um I had I helped a guy sell a business a few years ago in in Wales, and he was I think you and I have spoken about this, and he had a massive business on him and his wife ran it, and his daughter helped with the admin, but he had like 90 million under management.
• 47:20
  SPEAKER_02: And I asked him what was the thing that he enjoyed most about the company that he was he was working with, and I was working for the same company, and he said, I loved, I've just loved Brian that they've been independent and stayed independent the whole time I've been here.
• 47:32
  SPEAKER_02: And I said, I said, I've looked at your whole business, and I said, 93% of your clients will be Royal London, and he was laughing, he was cracking, still independent, cracking chap, yeah.
• 47:45
  SPEAKER_02: And he went, he went, no, they're not, and I went, There, and I was come back literally going back the next week to sign off the the um for him to get the money, and I said, Have a look before I come back and see you next week.
• 47:55
  SPEAKER_02: And I went back the next week and he went, You were wrong, and I went, Oh, was it?
• 47:58
  SPEAKER_02: He goes, Yeah, it's 94.5%.
• 48:01
  SPEAKER_02: But he had all his clients were in the Welsh valleys, yeah, and he basically said, Well, what's happened, Brian?
• 48:07
  SPEAKER_02: When the when the mines were closed, he said, I I started to see people, and I'd see one guy, and he and he'd say, Oh, yeah, I've got this, this, and this, right.
• 48:16
  SPEAKER_02: Okay, and I had proper due diligence and and um risk awareness and whatever else.
• 48:22
  SPEAKER_02: And he'd go, Yeah, that's the best thing for you, right?
• 48:25
  SPEAKER_02: Brilliant.
• 48:26
  SPEAKER_02: And then I'd get a phone call for his cousin and his cousin's cousin, his cousin's neighbour.
• 48:30
  SPEAKER_02: They're like, Oh, you don't need to come and see me, I just want what Jamie's got.
• 48:34
  SPEAKER_02: No, but I need to come and see you.
• 48:35
  SPEAKER_02: He says, And if it works, it works.
• 48:38
  SPEAKER_04: And if you went one of the firms we've worked with, one of the other risks we've seen is the lack of appreciation for not necessarily culture, but different approaches within a business.
• 48:51
  SPEAKER_04: So we worked with a firm who did an acquisition, they telephone-based advice service, they purchased a business who were face-face advice business, and they wanted they weren't going to change their proposition basically.
• 49:05
  SPEAKER_04: So those face-face advisors had to become telephone-based advisors, weren't weren't going to go out and see the clients, and it was they were very happy with the purchase, the advisors they were um bringing in, employed advisors, but um or much better qualified, wider breadth of experience, holistic financial planners, and they really thought it would push their business to the next level.
• 49:31
  SPEAKER_04: Six months later, one of those, I think there were 13, 14 advisors, one was left because they just didn't want to work on a telephone where it wasn't about going and seeing people, face-face relationships, it was about you're gonna do six or seven calls a day, get on the call, give the advice, get off, and you're probably never gonna speak to that client again because it's gonna go into someone else to deal with is part of the ongoing advice.
• 49:58
  SPEAKER_04: And I think that is something for me.
• 50:00
  SPEAKER_04: I think, and it's hard sometimes.
• 50:02
  SPEAKER_04: That may be a bit more of an explicit example, but a lot of the time that cultural differences in how businesses actually operate, because it's not something ever written down, it's really hard to assess that when you're looking at buying or selling a business, but it in our experience it has a impact.
• 50:19
  SPEAKER_04: I'm sure you've probably seen similar stuff over.
• 50:22
  SPEAKER_02: I think I think acquirers and some some are really good, and I deal I deal with a few um who are brilliant at at realizing that, and that probably sounded really Scottish.
• 50:32
  SPEAKER_02: You might need subtitles for that one.
• 50:34
  SPEAKER_02: Um they were on from the start, but yeah, yeah, thanks.
• 50:38
  SPEAKER_02: People people think they're buying an asset and they're not, they're buying a relationship, yeah.
• 50:44
  SPEAKER_02: So so if they're buying, and it's one of the questions actually about the 500 million of B UM You're buying, you're buying a relationship, not an asset, and and I think you need to remember that and relationship.
• 50:54
  SPEAKER_04: And I think that's something really hard for people not in the industry to get their heads around.
• 50:57
  SPEAKER_04: I I have that chat with people all the time when they're like, oh, working, it's fair.
• 51:02
  SPEAKER_04: But what what are you buying?
• 51:04
  SPEAKER_04: You're you're buying something of as someone else's relationships.
• 51:08
  SPEAKER_04: What what happens and relationships can walk, yeah, can't they?
• 51:12
  SPEAKER_02: And will and will walk if they don't like and and I'm sure the the in that example you use, Jamie, the clients that are used to the advisors going to their house or to their office or to the whatever to the pub to see them, suddenly getting a phone call and you're like, no, yeah, this is not for me.
• 51:31
  SPEAKER_01: Some clients prefer face-to-face advice, they don't want to be, I wouldn't necessarily want advice on the phone, right?
• 51:37
  SPEAKER_02: You you kinda it's you you've you've acquired a set of client connections, haven't you?
• 51:41
  SPEAKER_02: Yeah.
• 51:42
  SPEAKER_02: And this is this is what goes back to what we're just talking about, about how how long the air now is because you need to nurture those collects uh connections, sorry, before the person that had them before leaves.
• 51:53
  SPEAKER_02: Yeah, so it needs to be right, you need to take me with you to see Julia and then introduce me, and then and then if Julia phones you and said, I really don't like Brian, take somebody else because we don't want to lose that relationship until until you get it right.
• 52:08
  SPEAKER_02: Um and it's and it comes back to that founder dependency, doesn't it?
• 52:12
  SPEAKER_02: And service consistency.
• 52:14
  SPEAKER_02: It's not abstract, it's it's the difference between buying.
• 52:18
  SPEAKER_01: I think there's another advantage in that as well.
• 52:21
  SPEAKER_01: One of the problems we see when the acquiring firm goes in is however good the selling company thought their records were, there are gaps in it, and then the the new advisors underestimate how long it's going to take.
• 52:36
  SPEAKER_01: So, like, okay, well, I need to do X number of ongoing reviews, but they take longer than the ongoing reviews for your existing clients because you've got to get to grips with them.
• 52:45
  SPEAKER_01: Because it's not actually an ongoing review for the advisor.
• 52:48
  SPEAKER_01: Exactly, it's new, it's a new review, and actually, what you find is yeah, the guy who was advising them before knew them really well.
• 52:55
  SPEAKER_01: He had been to the funerals and the Christian, he knew the dog's name.
• 52:58
  SPEAKER_01: All I've got here is just a list of financial options.
• 53:01
  SPEAKER_04: She's got 500k in a sip with a viva.
• 53:05
  SPEAKER_01: And then I need to go and impress the client and make them feel like I understand their situation.
• 53:09
  SPEAKER_01: But I've looked at this, I don't really understand what's going on here, to be honest.
• 53:13
  SPEAKER_01: This doesn't look like how I would have done it.
• 53:15
  SPEAKER_01: Hopefully it's right, but I don't really know.
• 53:18
  SPEAKER_01: So you spend a lot more time prepping for those sorts of meetings.
• 53:21
  SPEAKER_02: Yeah.
• 53:22
  SPEAKER_02: Yeah, definitely.
• 53:23
  SPEAKER_02: And I I think I think and and I'm probably answering one of the other questions now, but I think a lot of people treat the deal as the finish line, yeah, and it's the start.
• 53:32
  SPEAKER_02: Yeah.
• 53:34
  SPEAKER_02: I use that phrase a lot.
• 53:35
  SPEAKER_02: Right, okay.
• 53:36
  SPEAKER_02: So I don't have an act of your mind.
• 53:38
  SPEAKER_02: No, I'm my nick tail for you.
• 53:41
  SPEAKER_02: But but it's the start.
• 53:42
  SPEAKER_01: Definitely won't mind.
• 53:44
  SPEAKER_02: It's the start then, but the deal, the deal gets all the attention and all the energy, and all the oh, we're gonna join such and such, or oh god, we're gonna join such and such.
• 53:53
  SPEAKER_02: And all the and the owners are fingers going, I've just made X and I'm off in two years, and I'm off in three years.
• 53:59
  SPEAKER_02: Um, and integration feels like the easy part, and it is absolutely not.
• 54:03
  SPEAKER_02: Integration is where it starts.
• 54:05
  SPEAKER_04: And where and I couldn't agree more.
• 54:08
  SPEAKER_04: So, in your mind, integration, what should firms be focusing on?
• 54:12
  SPEAKER_04: Then they've just brought that business, it's come in.
• 54:14
  SPEAKER_04: Where's your focus?
• 54:16
  SPEAKER_04: Client experience.
• 54:17
  SPEAKER_02: Okay, client experience and and stability in the business.
• 54:20
  SPEAKER_02: So um reassurance.
• 54:23
  SPEAKER_02: I I've asked and I'm gonna name them actually.
• 54:26
  SPEAKER_02: So one of one of the one of the companies that I deal with, a company called Superbia, right?
• 54:31
  SPEAKER_02: Who they when they've agreed to buy a business, they'll say to the advisor, right, we'll come to terms, they'll start before they even get to heads, I think, they'll say to the advisor, right, we're gonna write a letter with you to send to all your clients, and say to the clients, if you haven't already told them I'm thinking about selling, as you know, I'm 75 now, whatever the age is, um, can't be your advisor forever.
• 54:56
  SPEAKER_02: So I'm gonna look around and find you someone that I think is as technically competent as me or as nice as whatever it might be, I'm gonna start that sales.
• 55:05
  SPEAKER_02: So all the clients are like, oh yeah, we knew that was coming right, that's fine, that saves us going to do it.
• 55:10
  SPEAKER_02: Then when they get to heads, second letter goes out and they say, right, and I might be doing them as a service, it might, the timing might be wrong, but yeah, this is how they do it.
• 55:19
  SPEAKER_02: A second letter goes out, right?
• 55:20
  SPEAKER_02: I found the company, this is what they've called, this is their website, this is where the office is.
• 55:26
  SPEAKER_02: Um, I'm speaking to them about selling my business to them.
• 55:28
  SPEAKER_02: I really like them because bum, bum, bum, bump, bum.
• 55:31
  SPEAKER_02: Then the deal gets done, and the final letter goes and it says, Right, I've done a deal with them now, I'm retiring in three years, um, and I'm gonna bring Julia with me on this date to meet you, who's probably gonna be your new advisor.
• 55:45
  SPEAKER_02: That's brilliant, I think.
• 55:48
  SPEAKER_02: And and everybody's a client of the heart and center.
• 55:51
  SPEAKER_02: Yeah, absolutely.
• 55:52
  SPEAKER_02: Everybody should be doing that, and they're not.
• 55:53
  SPEAKER_01: And and that benefit of that handover, like I say, if you just get the file cold and you're trying to get to grips just from reading the file, that's nothing compared to being able to speak to the existing advisor and say, What is this though?
• 56:05
  SPEAKER_01: What happened in 2015?
• 56:07
  SPEAKER_01: Why did that happen then?
• 56:08
  SPEAKER_01: What's the background to it?
• 56:09
  SPEAKER_02: Yeah, but somebody died or something like that.
• 56:12
  SPEAKER_02: But that's the thing.
• 56:13
  SPEAKER_02: I think that the the first hundred days would we'd focus on stability and and reassurance.
• 56:22
  SPEAKER_02: So reassuring the advisors as well, if they're part of the deal, say, look, this is what we're gonna do, this is what's happening, bear with us because there'll be a bit of a change.
• 56:31
  SPEAKER_04: Um I think the advisor point's a really good one because rightly the focus is on the client and the client experience, which we'd all agree, but sometimes people forget about actually these advisors are really and they're gonna be as unsettled as the client.
• 56:47
  SPEAKER_04: If they're if you've got multi-advisor business and it's the foundry's been involved, they might not have known about the deal till a Friday when they're being told, Oh, this has all gone through, and next week we're in this new firm.
• 56:58
  SPEAKER_02: That's that's terrible, isn't it?
• 56:59
  SPEAKER_02: I've I've I've I've been involved in deals like that, and I'm and I'm like, Oh, do you want me to speak to the staff?
• 57:04
  SPEAKER_02: No, but are you not?
• 57:06
  SPEAKER_02: Are you not gonna tell them that this is what you're thinking?
• 57:08
  SPEAKER_02: No, no, no, I'm gonna tell them why, because they might walk, yeah, they might, but I tell you what they're gonna do when we tell them after the deal, they're definitely gonna walk.
• 57:14
  SPEAKER_02: Yeah, yeah.
• 57:16
  SPEAKER_02: Aren't they?
• 57:16
  SPEAKER_02: Yeah, yeah.
• 57:17
  SPEAKER_02: Unless they've they've so invested in the company.
• 57:19
  SPEAKER_02: I said so it's that it's that reassurance with the clients, the clients initially, because that's the business, isn't it?
• 57:26
  SPEAKER_02: And and the advisors as well.
• 57:28
  SPEAKER_02: Um, keeping the client experience consistent so nothing changing.
• 57:32
  SPEAKER_02: So many see so many businesses that come in and they're like, right, this is what's gonna happen.
• 57:36
  SPEAKER_02: We're gonna change the the ongoing from 0.75 to one.
• 57:39
  SPEAKER_02: We're not gonna take clients under this amount, we're only gonna do telephone reviews, bum, bum, bum, and the clients are just gonna go, yeah, buy them.
• 57:45
  SPEAKER_04: Yeah, aren't they?
• 57:46
  SPEAKER_04: That's that's not what I signed up for.
• 57:48
  SPEAKER_04: That's not what I want to do.
• 57:49
  SPEAKER_04: We we spoke about this in the last podcast, where actually, when you're talking about value and proposition, trying to maintain that consistency is really key because as soon as you take something away, people notice it.
• 58:00
  SPEAKER_04: If they've never had it, they're not gonna notice it.
• 58:02
  SPEAKER_04: But if you merge those two businesses and all of a sudden I used to get two annual reviews a year, now I'm getting one.
• 58:09
  SPEAKER_04: Yeah, that feels it feels like I've lost something because part of this.
• 58:14
  SPEAKER_02: And you're still charging me the same, yeah.
• 58:16
  SPEAKER_02: Which is which is what clients think, isn't it?
• 58:18
  SPEAKER_02: I'll think about or more in some examples I've seen.
• 58:21
  SPEAKER_02: Yeah, yeah.
• 58:22
  SPEAKER_02: And I and that's the thing that I think the the the businesses that get it right treat treat the integration as day one, not the deal.
• 58:31
  SPEAKER_02: Yeah, not the finish line, the start kind of thing.
• 58:34
  SPEAKER_02: Um, and the businesses that get it wrong for all sorts of reasons try and do everything straight away.
• 58:41
  SPEAKER_04: So if you were a buyer in this market, what's one piece of advice you would give them?
• 58:47
  SPEAKER_04: If I was a buyer, or you're working with a buyer, right?
• 58:51
  SPEAKER_04: What's what's one piece of advice you would give them?
• 58:57
  SPEAKER_02: Before before they buy a firm, I think, is obviously as as we said check the advice process, check the client files, check the historic files, there's nothing in there gonna come and bite you on the back side.
• 59:12
  SPEAKER_02: Check um check the culture within the business.
• 59:16
  SPEAKER_02: Um make sure that you've got the capacity to take the 150 clients or the 300 clients that you're taking on, and you're not gonna give them to to advisors that already maxed out.
• 59:30
  SPEAKER_02: Um and and don't don't change anything.
• 59:32
  SPEAKER_02: I I would say if you buy a business for the first everybody says 100 days, don't they?
• 59:38
  SPEAKER_02: But for the first probably six months, don't change anything.
• 59:43
  SPEAKER_02: Maybe even longer, maybe even the first year, year and a half, don't change anything that affects the client.
• 59:49
  SPEAKER_02: Change everything else, standardise everything else, standardise the processes, standardise the IT, standard, standardise the the advice process if yours is better than theirs, or or yeah, but look at that, but don't change anything that affects the client because the dude you said then the client would go, wait a minute.
• 1:00:06
  SPEAKER_04: Yeah, yeah, this this has now changed things for me.
• 1:00:10
  SPEAKER_04: You told me it was going to be exactly the same, and actually what I'm getting.
• 1:00:13
  SPEAKER_02: Yeah, because what what happens is is it's um the client will see it straight away and they walk, won't they?
• 1:00:20
  SPEAKER_02: Yeah, the client will say, Well, wait a minute, when I was dealing with Jamie, he used to come and see me twice a year.
• 1:00:25
  SPEAKER_02: Once a year we'd go for lunch.
• 1:00:27
  SPEAKER_02: Second time he'd just he'd come run just before Christmas and tell me what was happening and if I wanted to take any money.
• 1:00:33
  SPEAKER_02: Um now I get a telephone call off somebody who I've never met.
• 1:00:39
  SPEAKER_02: I'm gonna go and find another Jamie.
• 1:00:42
  SPEAKER_04: To wrap up, we always finish on some quickfire questions.
• 1:00:46
  SPEAKER_04: All right, so I won't have sent you these.
• 1:00:49
  SPEAKER_04: So just don't don't speak about Celtic and Lask.
• 1:00:52
  SPEAKER_04: Funnily enough, they are on my list.
• 1:00:55
  SPEAKER_04: We do quickfire questions because you when you talk with Dave, everything takes half an hour.
• 1:01:00
  SPEAKER_04: So I like to finish just on something nice and nice and quick.
• 1:01:04
  SPEAKER_04: So one word or one sentence answers.
• 1:01:09
  SPEAKER_04: Um what matters more in a deal?
• 1:01:12
  SPEAKER_04: The numbers or the people?
• 1:01:16
  SPEAKER_04: Complete the sentence.
• 1:01:18
  SPEAKER_04: A successful acquisition is one where dot dot A successful acquisition is one where that's not a one-world answer, is it?
• 1:01:29
  SPEAKER_02: I did say all one sentence.
• 1:01:30
  SPEAKER_02: Yeah, yeah.
• 1:01:31
  SPEAKER_02: Um a successful acquisition is one where the seller has been running the business like it's been for sale the whole time.
• 1:01:41
  SPEAKER_04: Nice answer.
• 1:01:44
  SPEAKER_04: What is the worst deal you've ever seen completed?
• 1:01:50
  SPEAKER_04: If this is interesting, it can be longer than a sentence.
• 1:01:53
  SPEAKER_02: Yeah, the worst the worst deal that I've ever seen completed.
• 1:01:56
  SPEAKER_01: If you're so interested, we'll have to go offline with it.
• 1:02:00
  SPEAKER_04: Um have you only ever been involved in good deals?
• 1:02:03
  SPEAKER_04: I don't know.
• 1:02:05
  SPEAKER_02: Yeah, I think I'd like to say that.
• 1:02:07
  SPEAKER_02: But I've not been I don't think I've been involved in any really bad deals.
• 1:02:10
  SPEAKER_02: I've walked away from a few because the seller won't listen.
• 1:02:13
  SPEAKER_02: And it goes back to that number down the pub.
• 1:02:16
  SPEAKER_02: Yeah.
• 1:02:16
  SPEAKER_02: It's like, oh, my mate sold his and he got four times.
• 1:02:19
  SPEAKER_02: Yeah, but your mate ran a good business.
• 1:02:20
  SPEAKER_02: Yeah, yeah.
• 1:02:21
  SPEAKER_02: That's a mess.
• 1:02:22
  SPEAKER_02: I've I've I I walked away from until that's a couple of years ago, where when I first went to see the advisor, who was a lovely chap, couldn't send me basic information to do a little fact find for the sellers.
• 1:02:35
  SPEAKER_02: Um and I went to his house and he had all his files.
• 1:02:39
  SPEAKER_02: This is three years ago, had all his files in the garage and boxes.
• 1:02:43
  SPEAKER_02: I was like, you're not selling this business.
• 1:02:48
  SPEAKER_04: What is the biggest red flag which you look for within an advice business when doing your due diligence?
• 1:02:55
  SPEAKER_04: Founder dependency, probably.
• 1:02:57
  SPEAKER_04: I think that's come through quite four boxes in the garage.
• 1:03:01
  SPEAKER_02: Yeah, yeah, yeah, yeah.
• 1:03:01
  SPEAKER_02: That would be the second biggest thing.
• 1:03:04
  SPEAKER_02: Founder dependency and and then advice process as well as well.
• 1:03:08
  SPEAKER_04: Uh private equity and financial advice, is it having a positive overall impact or a negative impact?
• 1:03:19
  SPEAKER_02: I I personally it would be close sort of 65 or 35 or 60-40.
• 1:03:28
  SPEAKER_02: Um because it's which way, sorry, positive.
• 1:03:32
  SPEAKER_02: Positive, yeah.
• 1:03:32
  SPEAKER_02: Sorry, yeah, because I think it's it's increased the numbers that advisors can earn when they're selling their business, which being an ex-advisor and being on their side is a good thing.
• 1:03:41
  SPEAKER_02: So you can you can get a little bit better for your for your life's work.
• 1:03:45
  SPEAKER_02: It's increased the the the standards on the sellers, which is a good thing because they're making the business better to sell, which means the clients are going to get a better experience.
• 1:03:58
  SPEAKER_02: But I think the the issue is then very quickly the the advisors are targeted, the fees generally go up, the process gets really simplified, um, they have a very restrictive central investment proposition.
• 1:04:13
  SPEAKER_02: So not all of them, but but a lot of them.
• 1:04:16
  SPEAKER_02: So yeah.
• 1:04:18
  SPEAKER_02: Uh Celtic or Rangers?
• 1:04:20
  SPEAKER_04: Celtic still.
• 1:04:23
  SPEAKER_02: I've I've shared enough tears over that team in the last I never even watched the game the other night because I just had a horrible feeling and then had to deal with all the messages.
• 1:04:35
  SPEAKER_02: More abuse from Celtic fans fans, to be honest.
• 1:04:39
  SPEAKER_04: And then finally, the English Premier League or the Scottish Premier League.
• 1:04:45
  SPEAKER_02: Is that a question?
• 1:04:47
  SPEAKER_02: Yes.
• 1:04:47
  SPEAKER_02: What is the question?
• 1:04:49
  SPEAKER_02: Which one?
• 1:04:50
  SPEAKER_02: Which one might be fair?
• 1:04:51
  SPEAKER_02: Yeah, yeah, which is the one.
• 1:04:51
  SPEAKER_02: Which one's better?
• 1:04:53
  SPEAKER_02: Obviously, the English, if you're talking about in terms of football standards, yeah, the English Premier League is probably the best league in the world, isn't it?
• 1:04:59
  SPEAKER_02: Oh, there's a snippet for it.
• 1:05:01
  SPEAKER_02: I reckon I could probably from a Scot.
• 1:05:02
  SPEAKER_02: That was from I think unless you unless you're completely deluded, that's that's which Scots normally are.
• 1:05:07
  SPEAKER_02: Yeah, there's a quick that as soon as these cameras went off, we're fighting.
• 1:05:17
  SPEAKER_03: On that note, uh thank you very much, Brian, for thank you very much for inviting me.
• 1:05:23
  SPEAKER_04: It's been brilliant having you on, and hopefully that's gave everyone a real insight into what goes on in the MA space in our industry.
• 1:05:31
  SPEAKER_04: Um, thank you all for joining us, and we will see you again next time.
• 1:05:35
  SPEAKER_04: Thank you both.
• 1:05:36
  SPEAKER_02: Thank you.