Are consolidators inadvertently acting as lead generators for small IFAs? & More Latest News Here – Up Jobs

Whenever I have a catch up, a chat or a meeting with an advisory firm, I always ask the same question: “How’s business?” And over the last six to nine months I’ve been met with the same response from all the small/medium sized IFA businesses: “Carla, we’re so busy! We’re absolutely snowed under with new client work. The leads keep coming and we’re not really doing much to try and attract these clients.”

Then earlier this month I was having a conversation with one of my contacts from the provider world, and we we’re talking about advisory firms. And the same thing came up from them: “All the firms we talk to are saying they’re so busy!”

And it got me thinking…what is happening in the market that is leading to this constant stream of new clients into the small/medium sized IFA firms?

And I think I have the answer.

It’s consolidation.

We’ve seen so much consolidation activity in the market over the last two years, and there must easily have been tens (if not hundreds) of thousands of clients that have been moved into a new organisation through acquisition activity.

In fact, I wrote an opinion piece for Money Marketing earlier this year on the subject of why consolidation done badly is a good thing. I outlined that because the world inside the big consolidators isn’t perfect and rosy, it was actually generating a trickle of advisers out the opposite side, who are taking the bold move to go it alone. But what it seems like we’re also seeing is an equal stream of clients coming out the opposite side of the acquisition deal too.

And who can blame them? Lots of these clients have not only been settled, but have strong relationships with their adviser and the wider advisory team. And these client’s often quite like dealing with a local firm, with a team of people they know and recognise. There’s a trusting relationship that’s been built.

When an acquisition takes place, particularly by the big national consolidators, no matter how hard they try, the acquiring firm can’t match what the client previously had. And that’s not an attack on the consolidators, many of them have done a great job of improving the onboarding and integration journey for clients. But they can’t get away from the fact they must operate differently to a small/medium sized business, simply because they’re operating with significantly more risk.

And I suspect this is the source of the steady stream of clients finding their way into he smaller IFA businesses.

These clients are often promised that nothing will change. Yet things change. Either their adviser or support staff get fed up with the new regime and walk. So, they’re moved to a new adviser.

Or they’re being presented with new investment solutions and platforms, and there’s constant talk about moving their portfolios to X, Y or Z place.

Or two years into the move they’re being told that their fee agreement will be changing, and they’ll be paying more.

Whether this change of fees and investments is right or wrong is a discussion to be had another time. But right or wrong, this change unnerves clients. And they start to look for a new home where they’ll feel more secure.

Couple this change with volatile markets and uncertainty with returns over the last two years, I can understand why a client that’s been through an acquisition journey may feel unsettled. And I can understand why they may prefer to look for a local, friendly IFA, where they don’t feel like the meat in a sausage machine.

Debatably though, this isn’t a bad thing for the industry. Undeniably it’s not great for clients. There’s no arguing the fact that the acquisition journey for clients is mildly bothersome at best, and utterly frustrating, time consuming and wearisome at worst.

However, the acquisition process does act to wake client’s up, and provokes them into taking a closer look at what they’re paying for, and that they’re getting in return. On the back of that we then see this nice redistribution of clients back out into the wider financial planning landscape.

Is this the reason why, despite claims over the years that there’ll soon be no smaller IFA firms left, we never get to that point? There’s often this worry that consolidation will mean all the small and medium sized firms will be swallowed up, yet every time we see the data around this, there’s never any real worrying decrease in small and medium firm numbers.

Perhaps the consolidators are inadvertently becoming the stimulus to new lead generation in smaller firms. So, despite concerns over consolidation, perhaps it’s actually creating healthy business activity for the wider financial planning world. Almost like this strange little ecosystem, where pleasant or unpleasant, every activity plays a positive role to the overall health of the environment.

Although unpleasant for clients in terms of practicalities, we can argue that acquisition can lead to better client outcomes ultimately. Those better client outcomes being that clients become more switched on, and challenge the status quo, ultimately finding a better suited firm to them from a cost, service and proposition perspective.

It shouldn’t take acquisition activity to wake clients up, but once they’re awake, it does wonders for healthy market competition and activity.

Carla Langley, former head of proposition at threesixty services, is founder at Langley Consultancy Services 

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