Small brokers do have a future with succession, but it won’t be with the larger consolidators, says Ataraxia boss Stuart Randall
Will consolidators learn the lessons of the preceding 10 years? Probably not.
Will the FCA clip their wings? Definitely (so they will make fewer but larger acquisitions).
Will they increase the multiples paid? Possibly (old habits die hard).
Will they be interested in sub £5m GWP brokerages? No, not generally, unless they want to bolt you on to an existing brokerage of theirs as a book of business – a fine way to destroy everything you have carefully built up over the last few decades.
After five years of low activity the old “Hub and Spoke” method of consolidation is well and truly back.
Small firm sale obstacles
In the past, most brokers have run up to the wall of retirement looked around and sold off to the highest bidder.
This is ok if you have a large firm when the amounts involved are large enough to keep you in the manner you want to become accustomed to for the rest of your life.
But if you cannot live for the rest of your life off what you sell for - then don’t sell. There are other, more palatable ways.
If you are 60 then your life expectancy is another 25-30 years that takes a lot of funding.
Selling your brokerage is a final act and the key to wealth retention is in the ability to continue to earn money albeit on a reduced time commitment – if you want to.
Look wider than just selling and consider alternative mechanisms for extricating all or some of your wealth from your firm.
If you have possible succession within your firm but no money to do it - then don’t despair, there are ways to achieve it without the younger members of the team having to sell their souls to the banks and giving the wife and children up as hostages to them.