RegulationJan 23 2019

Five things advice company acquirers are looking for

  • To learn about how to prepare one's company for sale
  • To understand what are the main drivers to the due diligence process
  • To learn about what makes a company more attractive
  • To learn about how to prepare one's company for sale
  • To understand what are the main drivers to the due diligence process
  • To learn about what makes a company more attractive
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CPD
Approx.30min
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CPD
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CPD
Approx.30min
Five things advice company acquirers are looking for

• Do you conduct internal suitability checks and, if so, do you have evidence to show how you use the results to share best practice and drive up standards among your advisers?

• How good are your suitability reports, and what could you do to improve them?

This is one area where we see huge differences in quality between companies.

Well-written and tailored reports that clearly and concisely explain why your recommendations are suitable for clients’ individual circumstances and objectives will inspire a lot of confidence in the quality of your advice, as well as the professionalism of your advisers.

On the other hand, there are a number of telltale signs that are sure to create a bad impression of your company’s standards; for example, poorly structured reports that are full of unedited, irrelevant standard paragraphs and risk warnings that contain typos and bad grammar do not demonstrate a commitment to clarity and transparency.

Crucially, sub-par suitability reports make it difficult for an external reviewer to understand what you are recommending to a client and why – the cornerstone of any financial advice company. 

What else might an independent regulatory specialist notice when reading your client files? Ask yourself: 

• Are your fees disclosed clearly and compliantly?

• Is there an ex-ante aggregated costs and charges disclosure for new clients taken on post-Mifid II?

• If a client file contains evidence of client dissatisfaction, is that reflected in your complaints register?

All these things can be indicators of the general attitude towards compliance and clients at your company.

Compliance control framework

If your firm is taken over, the chances are that you would use the acquiring company’s compliance-related policies and procedures.

Arguably, the state that your current control framework is in should not matter too much.

Nevertheless, we would usually take a look at some of the basic controls you would expect to see in an advice company in order to assess how seriously you take your regulatory obligations.

With that in mind, there are a few things you can check to prepare for an independent reviewer: 

• What would they make of your financial promotions register and sign-off process, and are you confident that your website and client-facing literature is compliant?

• What would they make of your complaint handling and conflicts of interest registers and procedures?

• What would they make of your compliance monitoring programme, and associated management information, which shows: a) that you (or the external compliance specialist you use) are regularly doing the monitoring; and b) what actions you are taking to address any failings identified?

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