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Six top tips for a successful joint venture

Fresh from launching a joint venture with a local solicitors, Future Life’s Peter Cook gives his tips on how IFAs can best structure link-ups with lawyers.

In the retail distribution review (RDR) world, where and how do you expand your business in a cost- and time-effective way? Future Life has chosen to form a joint venture with a legal practice to create a new wealth management brand.

As a result of changes to legal aid and the ownership of law firms, our company was targeted by five firms since its foundation in 2009, with the aim of forming a joint venture. These approaches were flattering but the timing was not right.

In 2011/12 the company was still integrating the many existing clients who had followed us to our new business. Our primary objective was to ensure our systems and operating procedures were effective before considering further growth.

Reform opens way to ties

In 2011, the Legal Services Act opened up law firms to the idea of other income streams. Handed the opportunity to operate under an alternative business structure, many are considering a multidisciplinary practice.

From an IFA’s point of view, a joint venture with a solicitor is a particularly attractive proposition. Following the RDR, it is clear that operating costs will be higher and the expectation to be more professional is likely to result in a gradual move to more complex cases. A solicitors’ practice would be a good source of introductions.

We considered the benefits of a joint venture. Once a decision had been taken to launch one, we had to search for a suitable legal practice.

Shared values are essential

For a joint venture to be successful, both parties must have the same goals, ethics and professional ambitions.

A typical solicitors’ practice will have a wide range of clients, ranging from young couples buying their first home to complex legal cases involving individuals, trusts and corporations.

A strong relationship with an IFA could be invaluable for generating extra income. It could also ensure the legal practice’s valued clients receive the best possible advice on a range of financial planning issues. Solicitors can have full confidence that the relationship is not merely transactional, but provides ongoing holistic advice.

Committing time and money

Integral to the success of the initiative will be training the legal staff and communicating industry changes to them. This means regular dialogue between the two firms, a joint focus on cases and the creation of viable leads by both organisations.

The time and financial dedication from both parties will be significant, but these early investments demonstrate a long-term commitment. At first, goals will need to be set, and marketing and business plans created. After that, regular progress reviews are an important part of reminding everyone of the benefits of the relationship.

Over time, the exchange of referrals from both parties is likely to deepen the trust and confidence between the individuals involved.

A joint venture means all parties are fully committed to the success of the business. It is unlikely any other business relationship would engender the same level of commitment.

Set goals together

Both parties must set joint goals that are tangible and ambitious, while remaining realistic. Set expected numbers of referrals plus a target value for business won by each organisation from those referrals.

There are also soft targets that revolve around sharing information, joint public relations and marketing campaigns, and a commitment to develop a deep understanding of each other’s business by all the fee earners.

The feedback from all staff will be vital in measuring the success of the joint venture, and will be used to set more stretching targets for each subsequent year.

In five years’ time, if the joint venture is seen as an integral part of both businesses, then it will have been a success.

Top tips for a successful joint venture

  • Engage accountants at an early stage to help develop the most tax efficient framework for the venture.
  • Employ your own lawyers to check and if necessary suggest alterations to the partnership agreement. A badly drafted agreement could cause immense problems and costs later on.
  • Trust, befriend and respect the individuals you are going into business with. It is going to be hard work and time consuming.
  • Establish a joint set of objectives and targets which are achievable but stretching.
  • Take time to get to know the other team’s fee earners and their support staff.
  • Do your homework beforehand; ensure the practice undertakes the style of legal work you are qualified to do and excel at.

Peter Cook is a chartered financial planner at Future Life Wealth Management.