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Buy client banks only, not the liabilities: IFA

Adviser firms who are looking for acquisitions should buy purely the client banks rather than taking on the liabilities that come with shares, an adviser has warned.

In an interview with FTAdviser, Sheriar Bradbury, managing director of Bradbury Hamilton, said it is inevitable if shares are bought and the liabilities are taken on that something will eventually come out of the woodwork.

Mr Bradbury purely buys client banks, meaning he does not taken over the liability for advice that has already been given, as this helps avoid problems that may otherwise arise in the future.

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He said: “I think there are firms out there who have bought businesses, done share purchases and have got little time bombs sitting in there waiting to explode.”

As an example he said he has seen several firms who have done a management buyout, generally by younger people who thought this was an opportunity for them, only to find that they are shouldering the responsibilities for advice others have given.

Mr Bradbury said: “They’ve ended up shouldering the responsibilities for something that someone else has done that goes back a long time. That person, maybe in good faith, has sold the business but when things come forward years later the person that has taken it over has found that they can’t continue and are out of business.

“From our perspective our client procedures are very tight - we have paraplanners, administrators and all the reports are given to the paraplanners and administrators to do the research and the prepping of the reports before they go out. A lot of pre-checking takes place.”

Earlier today, Mr Bradbury announced that he has acquired two client banks and plans to continue acquisitions.

He told FTAdviser that as all the acquisitions are funded himself, he is only looking for independent firms with a maximum turnover of £1m a year.

He said: “What I am looking for is potential... to grow the revenue stream and we are looking to improve the service to the clients, and we are looking at providing also new clients for advisers.”