IN THE LAST WEEK two practices have sold sizeable chunks of their business to a financial services specialist.
Foot Davson and Price Bailey took the decision that the offerings to their several-thousand clients were better served in the hands of BellPenny, a relatively new wealth management business looking to consolidate within the IFA sector.
But, in an age where businesses and individuals struggle more than ever to link with trusted advisers, selling off parts of your practice seems counter-intuitive. Where's the logic, what has driven this behaviour, and are the days of multi-disciplinary practices gone before they truly arrived?
At this point the Retail Distribution Review (RDR) can raise its hand, along with a cheeky grin.
The RDR, which came into effect from 31 December 2012, is legislation intended to take a several-pronged attack at less-than-impressive practices in the financial services industry, to give better assurance to consumers that the advice they receive is of good quality - along with a more transparent pricing structure i.e. on a fee basis, rather than commission.
It's a compliance step that many firms, accounting or otherwise, may decide is not worth taking.
Described by Price Bailey managing partner Peter Gillman as a "catalyst", the RDR has made all financial planning advisers reassess their offering.
Big decisions to make
But does that make RDR a game-changer? Important, say both Foot Davson and Price Bailey, but not the only factor in their decisions.
For Foot Davson, a small Tunbridge Wells-based firm, a partner departure played a big part in the decision - alongside the disproportionate time it was taking to manage the IFA business, likely to become worse with the added RDR compliance requirements.
"I wanted to take the accounting part of the business forward," says Foot Davson principal Tina Clay. "It's been a huge period of change for us."
Price Bailey has undergone big changes itself in recent years, and has decided that high-net worth individuals are becoming a key part of their business. Offering supplementary IFA advice to regional business clients is not.
"From our perspective, our business has moved. We've found it difficult to accommodate IFA regional clients and high-net worth," says Gillman. "We are making a strategic development, growth is in the high-net worth side."
But do the divestments make them worse businesses, less able to serve clients?
Experts say no. In general, there are great opportunities for firms to fill what ICAEW Financial Service Faculty's John Gaskell describes as a "brand vacuum".
Where the financial services industry's name has been tarnished due to numerous scandals, practices are in a great position to step into the void. But crucially, there are different models open to firms to help - and they don't necessarily involve direct financial service offerings.
Practices' three models
Gaskell describes three versions of an accountancy practice providing by corporate and personal advice: firstly, a practice can pass on the baton to a specialist adviser in the field, but in this ‘hand-holding' model the key for the practitioner is to know the right specialists to lead clients to; secondly they can enter into joint ventures, for example with a IFA. In this model the practice might have a share in the venture; and thirdly, integrate financial services in as a key client proposition. Firms such as Smith & Williamson, Grant Thornton and Mazars see personal financial advice as core to their business.
There is a constant pressure on firms to offer a broader range of services to clients - and this can sometimes come from the clients themselves. But small firms cannot be expected to retain such knowledge in-house, so the ‘hand-holding' method will be key.
"If you can help clients at a personal level, it's less likely you'll lose them on commoditised business services," says Gaskell. Smaller firms shouldn't be scared to outsource, and should also consider using technology to service clients, he adds. An example is the aforementioned Foot Davson, which uses cloud accounting services from Xero to work more closely with clients.
For Bellpenny, it is looking to pick up a £1bn in funds under management by the end of the year. The RDR has led to a "reality check" for professional services firms, confirms CEO Kevin Ronaldson.
"It's not a suggestion they were had sub-standard offerings...but to do all that and be profitable at the same time? It's best to give the opportunity to someone else to do it as bread and butter."
The ongoing relationship between the firms and Bellpenny keeps the IFA business "honest", he explains. "As Foot Davson and Price Bailey still [have business relationships] with those clients, and will refer new clients to us - we're committed to client service."
Accountants are well-placed to guide businesses, their owners and their families, whether offering services directly or through a portfolio of linked specialists. But they need to be open enough to ask clients: what do you want from us? "That has to be the starting point," concludes Gaskell. "Then, how can it be delivered?"
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