The proof? A year after RDR’s implementation, the FSA released data showing that 20 per cent of advisers said ‘enough is enough’, choosing to retire early, either through selling their business or simply winding up the business and shutting shop.
RDR really made a clean sweep of businesses, and what was left behind were companies with well-developed operational structures able to withstand and ride the wave of future, fundamental regulatory changes such as MIfid II and, most recently, the consumer duty.
And while many grumble about increased regulation, according to Gunner & Co’s annual M&A survey, fewer than 5 per cent of advisers state this as the key driver to sell.
In the same survey, the motivation to sell for 61 per cent of respondents was retirement and – with the estimated average age of advisers at 57 – that comes as no surprise.
Within a decade, the major catalyst for selling has shifted from inertia to necessity.
Buyer market diversification
In the 10 years since RDR was effected, the buyer market has evolved considerably.
In the initial period when adviser and company numbers dropped dramatically, there were a handful of national firms well-placed to pick up those opportunities.
Companies such as Succession, AFH, Bellpenny and Ascot Lloyd were prevalent in the market at that time, with a proposition heavily weighted towards full consolidation and integration.
Those priorities were prized at a time when continuity in the relationship between the client and the adviser was bound to be lost.
At the time many parties were often looking for little to no adviser handover to allow the buyer to start forging their relationship with the client as quickly as possible.
Those early deals really woke up the market to the opportunity to acquire, and come 2013-14 we started to see regional businesses wanting to get involved.
At this time deals still very much focused on consolidation and integration, but the buyer profile was expanding.
Smaller businesses, typically closer in culture to the seller, were popping up, keen to get a slice of the pie. This was also the time that almost all buyers were focused on achieving their return on investment through increasing client fees.
Since the client proposition was changing it was considered timely for buyers to bring in a new fee structure. It was very common in those days, as a broker, to hear buyers have their wish list centre around ‘firms charging 0.5 per cent, to increase fees’.
In the decade since RDR, the buyer market has swung towards profitability.
