Relationships with accountants are one of the best ways to grow a business. But would a formal partnership be one step better?
Paul Lothian’s presentation on partnering with accountants was one of the most popular sessions at last week’s Personal Finance Society conference.
Lothian has entered into two formal agreements with shared equity: at a more established practice in Dundee, and a new venture in Aberdeen that taps into the lucrative oil and gas markets (see below).
The effect on business has been transformative, he said: “Unlike solicitors accountants see their clients regularly, because of the tax aspect. Their referrals generally come with the clients already trusting you. It’s a much easier sell than approaching cold.
And, if you associate yourself with good quality firms, by association it raises your standard.”
But doing it properly takes time and thought…
Detail is key
When entering into a formal agreement, Lothian said, consider every possible detail, even down to “who gets the next car parking space”. Will clients referred from the accountancy firm go into a separate IFA business, or your current one? Who manages and stores client data? Will you work on-site or keep your own offices? Some accountants will have existing relationships with IFAs that will also need to be broken.
Beware personality clash
Accountants are naturally more cautious – and less gregarious – than the average IFA. “Someone once said to me that there aren’t many extroverted accountants,” Lothian said – “and the definition of an extroverted accountant is someone who looks at your shoes when they talk to you.” This can lead to a culture clash, but it mainly requires patience. Verus Wealth has been in a partnership for seven years, but it was three or four years before they got access to MNG Archbold’s better clients.
Start with the exit in mind
Formal links have been the main driver of growth in Lothian’s businesses. But assume that everything that can go wrong, will go wrong, he said. What happens if you want to sell your share in the business? Will there be any penalties for being a bad leaver? Restrictive covenants may also come into play.
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For more from the PFS Conference go to: www.ifaonline.co.uk/tag/pfs-conference
Partnerships in practice
Verus Wealth (Dundee)
Accountancy partner: MNG Archbold
Average per client: £200,000
Income from accountancy firm introductions: 33%
Ownership split: 50/50
A2+B Wealth (Aberdeen)
Accountancy partner: Anderson Anderson and Brown
Average per client: £400,000
Income from accountancy firm introductions: 90%
Ownership split: 40/60
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till