Consumer duty has "forever changed the landscape" for advisers selling their businesses, according to Victoria Hicks, group chief executive of Melo.
“It’s really challenging, and I'm not going to sugarcoat it at all," said Hicks.
"Consumer duty has forever changed the landscape. I sit in regulatory due diligence meetings and it can now take five to seven years to sell a business.
Melo describes itself as a 'lifecycle agency', helping financial planning firms with recruitment, progress and exiting the market.
“What the regulatory due diligence companies are having to look at now and the depth of which they are looking, it's night and day compared to even a year ago,” added Hicks.
Hicks said the focus for advisers looking to sell should be on the regulatory reviews because in the last 12 to 18 months she had seen firms that had gone from having a value to potentially not.
She said: “If you think about the demographics of these firms, especially those that are seeking an exit for retirement purposes, for a lot of them you've got owners who are wearing so many hats, the small businesses.
“So we're trying to encourage and work with these businesses, to suggest partnering with them to take a closer look at compliance, and to not just see it as something that you need to have but actually work hand in hand with your compliance for a period of time. So when you approach the market, you can do so with a full service history,” she added.
Hicks said acquirers and consolidators were wanting to buy and those firms that had all of their reviews and documents up to date and the correct systems and processes already in place were generating valuations higher “than we’ve ever seen”.
Shift to restricted advice
While Siobhan Barrow, UK distribution director at Royal London, said she was seeing a shift from a balanced market of both impartial and restricted advice towards just restricted advice.
She said: “That is predominantly because the smaller businesses are facing three core fundamental issues that they tell us about.
"First and foremost, training and recruitment, it is difficult for a small firm to find succession planning and building that in but it is even harder when you want to build in aspects of diversity and inclusion.
“The next is the regulatory intervention and the infrastructure required to be able to evidence the work that you're doing, which is a job in itself. And those two things lead to the third one, which is cost, and that's the cost of running a business and everything else that goes along with it."
Barrow said the industry needed to find a way to ensure the market balance to keep the choice available for customers of advice.
“We actually have to find a way to support the smaller businesses to be able to thrive in the current environment, and we need to come at it differently as an industry, because there's lots of business models out there, but what we're still seeing is this shift toward restricted advice” she added.
