View the article online at http://citywire.co.uk/wealth-manager/article/a741162
Reach for the parachute: does your business have an exit plan?
by Eleanor Lawrie on Mar 19, 2014 at 07:00
Boutique firms can boast of a number of attractions in relation to their larger peers: a more personalised service, continuity in management and an alignment of interest to name a few.
The downside for smaller outfits, however, is they can be more vulnerable if things go wrong. Whether it’s the loss of senior management or a big mandate; legal problems or falling into administration, small businesses need to have an exit plan ready to ensure their clients’ assets are protected.
Magnus Spence (pictured), a Wealth Manager cover star, knows this all too well. When Andrew Dalton, his Dalton Strategic Partnership co-founder, died unexpectedly in 2011, shutting down the wealth management business was floated as a possibility.
‘I recognise Andrew was really the driver of our wealth management business, and we lost some assets because of the relationships he had with clients – but it was completely understandable,’ Spence said.
Nonetheless, he believed that pushing on was the right thing to do, and instead, the business refocused its proposition.
For some wealth management businesses, shutting up shop can be the only option. A year ago, stockbroker Fyshe Horton Finney went into voluntary administration after a boardroom clash over the company’s future. What happened next serves as a stark reminder of the importance of having an exit plan in place. As the administrator worked to retrieve client assets, it identified a £1 million shortfall in client cash on their books
A new FCA consultation suggests in the case of insolvency, investors should get more of their money back than before, and more quickly.
‘We have recently consulted on rules to speed up distribution of client assets following insolvency, and would work with individual firms on a case by case basis to ensure consumers are appropriately protected,’ said an Financial Conduct Authority (FCA) spokesperson.
George Kirby, a consultant at Knadel, thinks the regulator’s next move will be to expand its attentions to smaller firms and what they are doing to safeguard clients’ assets.
Anecdotally, he believes not enough small companies think about what their next move should be if the worst happens.
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