There continues to be strong demand in the market for financial planning revenue streams with many interested advisers potentially keen to buy client bases to help build their own businesses. Some practices have taken the opportunity to sell their C&D clients in particular and there appears to be a number of reasons driving such decisions.
At the heart of it, many advisers are starting to wonder how the Future of Financial Advice (FoFA) reforms will impact the value of their business. With the mandatory introduction of opt-in come 1 July 2013, questions remain as to how valuable inactive client books will be after FoFA, particularly if advisers aren’t able to service them. Now may be a good time to consider whether you should keep these clients or look to realise their value and better use the capital elsewhere in your business. There are a couple of key considerations advisers need to make around the decision to hold or sell.
First and foremost advisers need to consider whether or not their inactive clients fit the target market and the profile of their business going forward. It very much becomes a segmentation issue and advisers need to question the value any misaligned clients generate versus the value they might generate if they can be sold.
Your inactive C&D clients may well better fit the value proposition of other advisers and be an attractive buying opportunity. We see quite a few practices buying client books that may have characteristics which are highly suited to their particular business and offering. Drivers of alignment for buyers can be very broad and, outside of cultural alignment between the buying and selling businesses, may also include other factors around geographic location, client age and/or products sold.
We see a large majority of inactive C&D client books being bought by young advisers who in many cases may be new to the industry. While an established practice might not have the capacity to service all their clients, these advisers often more readily have the time to get in touch with these customers, reactivate them and potentially uncover new needs that were previously unmet. The inactive C&D clients in your business may be a small fish in a big pond that a new enthusiastic young adviser is able to convert to a big fish in a small pond in their new and emerging business.
If you are holding onto your inactive C&D clients and haven’t got the time nor the resources to service them, it may well make sense to consider transacting the sale of these clients in the current market while demand is still strong. In the end, this may allow you some more time with those clients that are the best fit for your business. Regulatory changes in the industry are trending towards the need to more actively service all your clients and for existing business owners your C&D clients may be much better served by a new adviser who has both the time and resources to properly look after them.
