Brooks Macdonald's chief executive Andrew Shepherd has revealed what criteria he looks for in advice businesses when the firm is on the hunt to acquire.
Wealth manager Brooks Macdonald looked at more than 20 advice businesses last year, but in the end only decided to acquire two.
Speaking to FTAdviser, Shepherd explained why this was and what the firm is on the hunt for when looking to buy a business.
He told FTAdviser that: “An advice firm owner can probably sell to a consolidator and get six, seven, or eight times recurring revenue (as a price) and they won’t get that from us.
"But I would say, some of the consolidators aren’t always clear and transparent about what the future holds either for the adviser or the client. And we will be."
Shepherd explained that the advice firms Brooks Macdonald buys are usually firms that are already known to the business.
He added: "They come to us because we are clear about the future they, as people, can have within the organisation. Three of the individuals who led the firms we bought last year now work in leadership roles within Brooks Macdonald. We are very clear about the future, and that way there are no shocks, so why would they leave?”
He told FTAdviser they tend to avoid firms that may have given “esoteric” advice in the past and so face regulatory issues in the future, for example in areas such as pension transfers.
Shepherd added Brooks Macdonald only wants “quality” businesses, rather than those which may need to be “fixed up".
Also, there must be a “cultural fit” between the acquired firm and his own, by which he means “the advisers attitude to regulatory risk and in terms of how they treat their staff".
"We want it to be a fair price for both parties," Shepherd said. "If we buy a firm, and the adviser comes to work for us, we don’t want them to resent the price we paid them, because then they will leave.
"Instead, we want advisers who are happy to help us grow, advisers who want to go out and meet clients, both existing ones and new ones, while we take care of the compliance, HR and administration.
"We find that lots of advisers out there, even after they have been acquired, want to still work with clients. And lots of them want to know they have done the right thing by their clients and staff, if they bump into them in the future.”
Shepherd's comments come in the context of Brooks Macdonald reporting assets under management of £16.8bn, an increase on the previous year, and while profits fell from £34.5mn to £30.3mn, the latter was the result of higher inflation, according to the company.
