Most IFA firms are still generating higher sales margins even during this economic downturn, but sma...
Most IFA firms are still generating higher sales margins even during this economic downturn, but smaller IFA firms may struggle to cope with the additional cost of regulatory reforms and changes to PII rules unless they can increase the amount of annual business they generate per employee, IFAonline's analysis of the Plimsoll report suggests.
Financial details of the top 1000 IFAs inside the Plimsoll Portfolio Analysis of IFAs 2003 suggests that, in the main, all sizes of IFA companies have managed to maintain a relatively healthy business and profit over the last three years - while investors faced a bear market.
However, there are still indications that some firms may have higher liabilities than assets, little liquidity to cope with emergencies or insufficient sales to stay afloat unless they change their business practices.
This may also be much worse than anticipated across the industry as the report only looks at the biggest firms.
According to the Plimsoll report, there has been a broad mixture of performance for IFA companies filing accounts since 1999, as companies:
Companies tended to generate, on average, between £35,000 and £65,000 in sales per employee, while the healthier firms are generating at least £100,000 per employee, according to the analysis document of publicly-listed and limited company IFAs.
Those firms generating less than £30,000 a year per employee - some go as low as between £10-20,000 - may therefore find they have insufficient assets or cashflow to cope with a fall in sales or increased costs.
Companies such as Bevan Matthews in Cardiff, for example - with just six employees - or Hayburn Rock Associates in Stourbridge - with seven staff - may have discovered some of the secrets to keeping a good IFA firm afloat during hard times as they appear to have maintained strong sales, profits and liquidity throughout the downturn.
Many of the larger firms and networks, such as Chelsea Financial Group, Countrywide, DBS, Falcon Group, Hargreaves Lansdown and M&E Network have also managed to stay in profit - albeit they may have to reduce dividend payments in the future - and in the main have kept sales climbing.
Chase de Vere has seen its sales drop around 20% in the last two financial years and its profitability as a result, says the Plimsoll report.
Aegon-owned Positive Solutions, based in Newcastle, fared much better to December 31st 2002 as sales growth continued to be healthy and profits turned upwards after December 2000.
Millfield Group, however, did face a substantial pre-tax loss in the year to March 31st 2002, as the company lost £7m against sales of over £20m.
It even reveals that both the Association of IFAs and IFA Promotion - which are not-for-profit companies - have kept a tight ship and still increased business conducted over the last four years as both groups have stayed within budget.
Results of the report appear to indicate that IFAs handling trustee business, in particular, are more likely to have struggled in the last couple of years, but other firms have used the drop in business to work out how to improve profit margins and increase sales.
Further breakdown of the report into sectoral, regional and sales rankings, as well as details of industry averages and financial ratings of firms are also available by purchasing the full report from Plimsoll for either £309 paper-based, £500 for the e-version or £650 for both.
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