Phil Bayles’ comments come in response to Aviva-commissioned research revealing one in 10 brokers don’t have a succession plan in place
New Aviva research suggests almost 90% of brokers don’t have a succession plan in place for exiting the business.
The findings have alarmed the insurer’s managing director of intermediaries Phil Bayles.
Bayles stressed the importance of longer term thinking to ensure owners can get the best outcome when they come to exit the business – whether that be through selling up or completing an MBO.
“Succession can go well, or it can go really badly,” Bayles said.
“You meet a lot of ex-brokers who sold out without doing proper due diligence on the people buying them, and then they’re upset because the office gets shut down and the staff get kicked out, and the clients get taken up to a call centre in Manchester when they used to be dealt with in a market town in the west country.
“You have to understand what the options are and what the implications are, and then you have to make the best choice for them.
“It’s not for us to tell brokers what they should be doing, but most brokers we know are very focussed on making sure their staff, management and clients are well looked after post-implementation.”
Other key Aviva research findings:
- Overall outlook for industry remains one of growth and confidence, with 42% of brokers planning to expand their business
- Interest in cyber insurance surges, as a third of brokers (34%) see an increase in enquiries
- Most pressing concern for brokers (78%) when clients don’t follow advice is that they will be left underinsured or have gaps in their cover
The research found that 13% of brokers don’t have a succession plan in place, despite 9% admitting they expected to leave the industry within the next 12 months.
Retirement (59%) was given as the primary reason for brokers planning to leave the industry.
And Bayles added: “We know there’s an aging profile to brokers and there are multiple different ways of moving toward retirement if you own a business.
“Five years ago we knew this point was coming, and it’s an interesting time. There are a lot of buyers out there and a lot of money for MBOs.
“You can get regional on regional purchases, you can get consolidator to regional purchases, you can get MBOs – we’ve seen them all.”
Aviva employs several consultants, many of whom are ex-brokers who have gone through the process of selling up. And Bayles said professional and independent advice was very important to a owner’s exit plan.
He said: “Most of the time you only sell a business once. You don’t get to go through a rehearsal, so you have one chance to pass it on to someone else.
“The question is what objectives have they got and what’s on their priority list.
“How important is it that the name stays above the door? How important is it that you look after the management and staff? How important is it that the clients are looked after by someone local?
“Do you want to maximise your earnings or not? Do you want to stay in the business for two to three years and have a slow retirement or get out immediately? Are there multiple shareholders with differing objectives?
“There’s all sorts of challenges that surround succession that need proper professional independent advice, and you need people that you can trust.”
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