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“Don’t You (Forget about Me)” – Private Clients in M&A

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The last year or so has seen a flurry of mergers and acquisitions in the private client world. Even the normally sedate private office market had some big news with SandAire and Lord North Street, and Stonehage and Fleming Family & Partners joining forces. The legal sector saw Speechly Bircham and Charles Russell merge, and in December private client firms Hunters and May, May & Merrimans announced they were merging this year.

2015 year has got off to an active start with further consolidation in the IFA market courtesy of AFH, Tavistock Investments and Towry to name a few and time will tell if some of the big moves of last year in the private client investment manager space will see activity of the size of Old Mutual/ Quilter Cheviot, Rathbones/Jupiter or Tilney/BestInvest.

The key drivers for such deals inevitably differ widely although the rising cost of compliance and the associated virtues of scale loom large for FCA-regulated firms. Whatever the underlying reasons for any decision to merge or acquire, all private client firms face a common challenge in terms of the importance of taking their clients’ goodwill with them.

There is often a cultural reticence in communicating from the centre with clients in what may be seen as going over the head of the front office/fee earners who may be quick to point out that reassuring clients that their business is in safe hands is their job.

If this was ever wholly true, it’s not an argument that stands up well in today’s world for a number of reasons however.

NEWS TRAVELS FAST

Clients will probably find out all sorts of news and developments before you can tell them anyway. Any ability we traditionally had to ring-fence “trade” and “consumer” media fell away some years ago in a world where headlines are grabbed from the newswires and tweeted before you’ve had a chance to clean your teeth in the morning.

CLIENTS WILL HOLD FIRMS TO ACCOUNT IF THEY ARE NOT PRIORITISED

This was neatly summed up late last year by The Financial Times’ Jonathan Guthrie in a spoof piece entitled “RBS must respect royal prerogative in changing Coutts” purportedly from the Queen to Coutts noting a sound of caution as the bank’s “best known customer”: “Just make sure that in ‘grinding out efficiencies’ in domestic retail banking, you don’t forget Coutts customers still expect a top drawer service.”

Taking clients with you is imperative. They have a stake – literally probably if you are a public company. Forward thinking firms are using communications that are more than one way information dissemination via letter/email and a quick call to key introducers. Options might include inviting clients and business partners into your confidence, creating permanent or semi-permanent advisory boards to get their input into your business and/or ad hoc panels to get direct insight into specific projects such as any rebranding.

CLIENTS NEED MORE COMFORT

This isn’t designed to undermine the adviser-client relationship but to underpin it, to reinforce a client’s importance to the firm. In a world where clients are increasingly aware and concerned about the perceived precariousness of the financial sector, clients want to be crystal clear who they are dealing with and how safe, secure and commercially viable the firms charged with the stewardship of their assets are.

This isn’t just an issue for client retention. Clients and introducers need to be confident that if they are referring a firm or an adviser that they know exactly what sort of client that firm is looking for and what sorts of client needs it can address. They don’t want to create any embarrassment either for themselves for the firms that they are referring, or for the potential client they are referring. The process of referral needs to be carefully nurtured at the best of times but needs particular attention when firms are undergoing seismic change.

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