The impact of FoFA is resulting in a short term trend of declining business value, according to Seaview Consulting.
Some of the short-term decline in value will be driven in part by an outstripping of supply over demand, quite the reverse from what the industry has experienced over the past six or seven years. A large part of this supply will come from practice owners choosing to put their businesses on the market rather than to go through the changes required to be effective in a new regime.
It will also come from business owners looking to rationalise their client base and to sell off the section that does not fit their target client profile.
Seaview Consulting director Bob Neill, says that it is vital for businesses to understand that value is a measure at a point of time, based on a view of what will be delivered in the future.
“The more certain the outcome, in other words, the lower the risk, then the greater the price someone may be willing to pay for the future results… This is a fundamental that simply does not change and should be kept in mind when determining what the impacts of change are going to be,” Neill said.
Fellow Seaview Consulting director David Fotheringham says that businesses will be successful as long as they are positioned to deal with change and have an efficient operational framework in place.
“The financial practices will need to have control over their revenue sources, a robust client value proposition and engagement model together with a strong governance culture and be economically strong,” he said.
Although his comment describes a good business regardless of the industry, he says that the business principles have been ignored over time.
Running the business with adherence to sound business principles sounds straightforward but it does not happen by chance so the reporting and management regime must be vigorous and appropriate skills applied to its execution.
Ensuring that the service offering is appropriate and effectively delivered will be crucial in an environment where clients are given a range of choice unseen before in the financial advice industry.
Above all maintain a focus on profitable growth, repeatable systems, and sound management. If practice owners do this effectively they will reap the maximum reward in what will be a vibrant industry in the future.