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Exit planning: Brokers urged to address the ‘elephant in the room’

  • 07/06/2017
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Exit planning: Brokers urged to address the ‘elephant in the room’
Building a brand, rather than simply a decent client base, is crucial to exit planning, brokers have agreed.

Martin Stewart, director at London Money, said that succession planning is an “elephant in the room” which needs to be addressed, noting that when he has discussed buying client banks with retiring brokers in the past, the brokers have “misjudged the value of what they have.”

He said: “In essence most brokers have a database of clients who have transacted business previously – over and above that there is not much value. I could buy a similar sized database today for £1,000 so why would I pay £100,000 for what may well be the same list?”

Stewart argued that it is vital for brokers to focus on building a brand, saying: “If you have a recognised brand, multiple income streams, a presence in the media and are viewed as a trusted source, then you at least have something that people will buy a share in. Only then will you probably have a business that can be sold for a life changing sum of money that warrants the 20 years of hard graft that you have committed.”

David Sheppard, managing director of Perception Finance, said that in most cases clients are loyal to the individual broker that helped them, rather than the company, which can make an effective exit strategy for a sole trader “nigh on impossible”.

He continued: “As a limited company, although we are not yet working on this; the long term goal would be to employ more brokers and slowly introduce our pre-existing clients to them.  

“This is not going to be an easy process but, if done right, will mean we can get the company to a position where there is an exit strategy be that selling the business or maintaining our shareholding and employing people to run the business in the future.”

Mark Dyason, director at Edinburgh Mortgage Advice, said that his own strategy when the time comes will be to see what value the business has for a sale, or else turn to his contacts in the industry to ensure that his client bank continues to be serviced properly after he leaves.

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