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Navigating the road to business transition

It’s probable that many IFAs will be contemplating changes in their businesses at this time of the year. The start of a new decade, 2010 is a year of potential opportunity if your mindset allows it to be. In 2009 the RDR was thrashed out and some further thrashing is inevitable. For business owners and managers RDR is one reason to make changes but even if it was scrapped, sound business management principles suggest business transition is a constant as nothing stands still in commercial world.

A criticism of the financial services industry of the last n years is that it’s been driven by regulation, legislation and distribution pressure. The result has been an advisory landscape which has left itself open to allegations of bias, unprofessionalism and miss-selling. In general consumer miss- trust of the wider financial services industry is now at its highest.  Any professional operating in this environment should want to shake off this image and ensure their business is seen on a par with other types of advisory professional firms their clients engage with.  So RDR aside, how should a firm address significant change to their business model? What is the pathway to transitioning a firm to build value for the future not just cash flow today? These and many other questions need to be addressed in 2010 if a firm is to  future proof  itself from the past and build a sustainable platform for future prosperity, growth and an exit path for principles and managers when the time comes to retire.

These are all significant subjects in their own right and merit, no demand considerable time and effort to address them in a meaningful way. What IFA firms have lacked is an easy to follow affordable program which take them step by step in a logical way through the change management process.  In 2009, AIFA launched its FFWD online Business Transition Academy to fill this space. It’s a reason in its own right to be an AIFA member, as to buy this high level of support commercially for your IFA firm would cost you a multiple of the AIFA membership fee. AIFA members get access to FFWD free of charge.

The business transition program follows a process which can apply to most commercial operations. It starts by contemplating ‘where are you now? Challenges a firm to define ‘where they want to be?’ and then helps to plan out ‘how to get there?’

Most business owners would argue they know exactly where their firm is now. They have a handle on the financials, they are involved to varying degrees in the day to day client activity, and they know what their clients need. The danger is they are too close to the business and need to stand back. The Business Audit process allows a firm’s management team to ask themselves structured questions which challenge them to really understand the current state of the firm. For example knowing the competition, understanding exactly where business comes from and which types of client are most profitable.

Having put the stake in the ground to define today’s current business situation, FFWD helps the firm to define where they want to be in the future – their business vision. This sets the agenda for business change and various tools allow business owners to create the shape of their future business. These are the sorts of questions the business vision module helps a firm to address;

»   What are my / our key goals and aspirations for the business?

»   What do I / we really want to provide for clients?

»   What do clients expect from my / our firm?

»   What type of business would I / we like to work for?

»   How do I / we want others to view the business?

»   How far beyond meeting minimum RDR requirements do I / we really want to go?

The last question is particularly pertinent. We see the market segmenting in terms of RDR intentions. Many firms intend or are already on the road to transitioning their business much further than the RDR demands. We see that as a very encouraging sign that IFAs intend to grasp the opportunity to transition their business onto a par with other professionals. Even if you see minimum RDR compliance as your goal, a structured approach to making changes is vitally important to make it happen. Whatever your goals, the AIFA FFWD Business Transition Academy is an important resource for all IFAs so we’ll be showcasing the other AIFA FFWD modules in forthcoming articles.