In difficult times as we’ve seen with Brexit, the drought or Nenegate to name a few, we see a lot of businesses buckle under the pressure, but those that survive are often thanks to a merger. With rising pressure from the FSB in terms of regulations and changes ahead such as RDR and TCF, the brokerages are feeling the effects and taking the strain. In the old days a group of waggons would travel together and when danger was near, form a circle called a “laager”. It is far easier to withstand the elements as a unified group of waggons that face the challenges alone.

As an independent operator in the wilderness of financial planning, you need to be the hunter-gatherer, while also keeping the house in order. This becomes problematic when something affects your ability to meet all your responsibilities. When you put all your eggs in one basket in this manner you could be exposed financially and your clients put at risk.

A merger often allows one to become part of a bigger practice, increasing the size of your “laager”.

Being part of a pack ensures protection and support when we need it, it also allows us to also slow down, take a break and share the load.

Mergers provide more skills for your clients

Mergers are not just a crutch in moments of weakness, but also a tool to add strength to your business. A fist is stronger than the 5 fingers that form it. A standalone operator can be compared to a GP, which is competing with a hospital; a GP is able to provide general medical advice but falls short when specialist services are required.

A hospital is a team of Doctors that operate together, combining their individual skills to solve any range of challenges, ensuring that every “patient” gets the right treatment. A specialist is also a sought after commodity, which if leveraged correctly could attract new clients that require their specific skills.

You need to ring-fence your clients, which is difficult to do if you can’t offer the skills or services your clients need.

A merger will bring extra skills to the table, which will allow you to service all your clients’ investment needs. It can also remove other constraints such as you licence category, operational ability, time or cost; these extra skills and added value will benefit both you and your client.

Mergers remove compliance issues

In terms of new legislation going forward, with RDR and TCF, every advisor will have to show value to earn the fees that they charge. Whether it is doing an extensive needs analysis for risk or the due diligence on the funds you select for an investment, it is going to take time and resources to adhere to the compliance requirements.

When working with an investment house such as Stringfellow, who has won a Raging-Bull Award, you can rest assured, that every aspect of their multi-managed investment products has been carefully evaluated from the market fundamentals to the performance and philosophy of their underlying funds.

Mergers empower you to focus on growing your business

Another advantage that a merger provides is time. Being independent broker means you need to have good time management skills; you are the key individual, purse string controller, compliance officer and everything else besides financial advisor to your clients.

When you are spread that thin it’s easy to fall into a downward spiral where you only have time to focus on servicing existing clients and never have time to go out and find new business.

As previously mentioned this will only get worse as annual reviews and continued rebalancing of portfolios will become a compliance requirement to keep the advice fees flowing in. When working with a team you can focus on building your book while knowing the technical requirements are taken care of.

Mergers reduce operational costs

Beyond freeing up your time to focus on expanding your business, it also reduces the costs for you to do so. Sharing costs, means economy of scale, reducing administrative costs and the financial pressure on your businesses. Pooling the resources allows you to cater more for marketing and growth, allowing for the rolling stone, which is your practice, to gather more momentum and pick up more business as it rolls on.

As with most things in life, if not planned correctly, there are disadvantages that must be taken into account. An unsuccessful merger can be compared to a divorce, leaving no party happy and only the lawyers richer.

It is important to remember that control becomes a shared commodity, which includes both the liabilities and profits. A merger’s potential for success is determined by the level of planning and structure used at the start of the process.

When well-structured, the road ahead and any potential problems can be dealt with before it becomes too much of an issue. Mergers offer a lot of great advantages, but like any good journey, you need to have a plan, a set destination and clear roadmap of how you going to get there.

A good business takes time to build, but very little time to destroy, when considering a merger do the necessary research and consult financial advisors that are familiar with the process. Stringfellow Investment Specialists continue to help small and/or individual brokers become part of bigger more successful teams and would be happy to assist you in the same manner.

If a brokerage merger is something you’re considering fill in the details below and we’ll contact you for obligation free consultation to see how we can maximise your business.

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