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David Hesketh, acquisitions manager for Perspective says support for advisers is cost-effective.
by Melanie Tringham, FTAdviser
David Hesketh, mergers and acquisitions manager of Perspective Financial Group, said that reducing a business’s costs was a good way to improve profitability – one of the most important ingredients he looked for when seeking acquisitions.
He said: “Some businesses pay an adviser 60 per cent to 80 per cent of the income, and it is their client that they look after. With our model their clients are owned by the practice and the adviser is getting plenty of support from the paraplanner.”
Mr Hesketh said it was cheaper to pay a salary to the adviser and employ a paraplanner, who could deliver a good level of service to the client, than have the advisers self-employed doing everything themselves.
He added that using a wrap efficiently could also cut costs.
Mr Hesketh said profitability was one of three aspects that he was looking at when hunting acquisitions. The others were a strong recurring income, and having a management team in place that could continue to deliver profits and the income stream. However he said that did not always mean keeping the management team that came with the business.
Perspective was set up in 2008 and has made 25 acquisitions. Mr Hesketh has scrutinised 304 businesses as potential acquisitions and visited 205 of them.
Many were rejected because they were on ‘fishing trips – trying to find out what their business would be worth.
He said: “Other acquirers are more interested in the funds under management. We look for profits going forward underpinned by strong recurring income and we look for a management team to maintain that profit going forwards.”
The most recent acquisition was the purchase of Tyne and Wear-based advisory business Vivienne Shepherd, which took perspective’s annual turnover to £23m and assets under management to £2bn.
Sue Whitbread, communications director for the Institute of Financial Planning, said that hiring a paraplanner meant an adviser could spend more time dealing with clients. The paraplanner could focus instead on administration and report writing.
She said: “From a business point of view, it is scalability. If the financial planner is doing everything for each of their clients, all the research and all the meetings, then they are limited to far fewer clients. If they have passed over their research and reports, that gives them more time and they can use their time more constructively at building their client base.