Firing lineOct 10 2018

Part of our succession planning is having me not do all the work

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Part of our succession planning is having me not do all the work

Passing on a self-made business for the next generation to run often comes with numerous technical challenges.

Ensuring this process runs as smoothly as possible is at the heart of any succession planning strategy.

But how does a company ensure the culture of the business also survives?

For Nick Bamford, financial planner and director of Informed Choice, the biggest challenge is “letting go, and accepting that there are better people to take over”.

After a 24-year tenure at chartered financial planning business Informed Choice, Nick Bamford and his wife Andrea both intend to retire from the business in early 2019.

I think we will retire when the new financial planners settle in and take over the work that we currently do.Nick Bamford

Building an employee ownership trust is one working plan for how his company will succeed once he and Andrea do eventually retire.

This month, Informed Choice obtained a second office space in Petersfield and is set to expand its staff from 13 to 16 members by the end of 2018. The company will hold onto its Cranleigh-based office.

Mr Bamford reveals the business is in talks with the Employee Ownership Association to potentially launch an employee ownership trust.

He explains that this involves creating a trust and selling the majority of the business’s shares to the trust. Shareholders who sell to the trust are paid from any future profits of the company.

“Instead of having a capital sum and you go off into the sunset, you actually get paid for your shares over a protracted period of time,” says Mr Bamford.

Mr Bamford explains: “There is continuity of the company for the benefit of the shareholders and the clients and the employees.

"Existing employees who want ownership of the company but don’t have shares will also be able to benefit from it. We have looked at the technical part of it, we are now looking at the emotional part of it,” he continues.

Mr Bamford says an employee ownership trust is not “a socialist thing to do,” nor like Labour’s recent proposal for bigger corporations to give 10 per cent of ownership to employees. He says this is different because “it is trust-based rather than individual share-ownership based”.

Nick Bamford and his wife own 70 per cent of Informed Choice’s shares, while their son Martin owns the remaining 30 per cent.

Aside from exploring an employee ownership trust, Mr Bamford says Informed Choice is training its next generation of financial planners to prepare for their eventual retirement.

“We have just offered a role to another trainee paraplanner. We are interviewing for an experienced paraplanner and we are recruiting for an administrator,” says Mr Bamford.

New blood

A new chartered financial planner is due to join the business as director of retirement and income planning, who will become a board member.

Mr Bamford says: “Part of our succession planning is having me not do all the work. I think we will retire when the new financial planners settle in and take over the work that we currently do.

"We have a job, of course, to communicate this change to our clients who have been clients of the company for very many years, but we work on a team basis. Because of that our clients know members of the team very well – it will be easy to replace me.” 

Mr Bamford comments: “If we sold Informed Choice to a larger entity today, they would want to ensure that what they are buying was integrated into their brand. Selling it may give you capital now, but it doesn’t necessarily mean that business will continue into the future."

“Having a business is like having another child: you want to see it progress in the future even if you are not there every single day. The practicalities may mean that we do not [pursue the employee ownership trust], but we are exploring it certainly as a form of succession,” says Mr Bamford.

Responding to his outlook for the financial planning industry, he says: “One of the things which has happened in the past 10 years has been this move move towards professionalism.

“Now everybody has to have a diploma or qualification. I think the required qualifications will rise even further to chartered status in the next 10 years.”

He notes a shift in the demographics of financial planners, noting that many are now joining at a younger age than was previously the case. 

He calls for the industry to do more to increase the representation of women employed in client-facing roles.

Mr Bamford says: “A lot of people in this profession wear suits; that may intimidate women. Let’s make it an environment that everybody feels comfortable in.”

Mr Bamford also predicts a shift towards execution-only investment platforms.

He says direct-to-consumer platforms are rising in popularity and financial planning businesses could team up with them to yield optimal results for their clients. 

“People always talk positively about D2C platforms, they deliver what consumers want at a lower price,” he concludes.

Saloni Sardana is a features writer at Financial Adviser and FTAdviser.com