The move has not yet hit the headlines but the implications are too big to ignore.
Here is the situation: under the traditional mergers and acquisition model, a consolidator buys an adviser firm, paying a multiple of fund-based renewals. Part or all of the payout is usually conditional on the adviser moving assets on to the consolidator’s platform, or into its investment proposition.
Unfortunately this incentive to transfer assets is something the FSA (and now the FCA) seems not to like. It views it as inducement, encouraging churning.
What is more, in one recent conversation, the regulator said it is inappropriate to pay bonuses to any client-facing staff, because these advisers should only be providing advice, not generating sales.
In my view acquirers now need to completely rethink their payment models when conducting a takeover.
Brian Spence
Managing partner
Harrison Spence Partnership
London
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