Philippa Gee: Is restricted really less risk than independent?


So here is a thought to really get some of you cross: is restricted really less risk than independent?

A phonecall I had recently was from an organisation who wanted to buy our company. Whilst I can appreciate I am not alone in this, as there seem to be many such calls to advisers of late, I was keen to send them on their way with a one word – “no”.

However they did say something that got me thinking, as their view was that they are willing to pay 3x agreed earnings for an independent firm and 6x for a restricted firm. Whilst they could have plucked any figure from the air and I would still not have been interested, I just questioned how true this concept of restricted always being less risk is, or is it an urban myth?

Putting it simply, I can see that a practise that doesn’t have to include higher risk products in their range of investments is immediately perceived as less risk at face value, but haven’t we moved on a little from that?

If the FCA have the teeth they purport to have, rogue products will be fewer and the lack of commission bias an obvious deterrent. An independent firm, with the right risk controls, processes, loyal advisers and clients, could pose less risk than certain restricted organisations where some of the advisers and clients may not perhaps be as permanent.

I am not trying to say restricted is wrong or independent is right, each adviser and business owner makes the right decisions for them and their clients. What I just want to flag up that it shouldn’t automatically be the case that restricted is always lower risk.

If you are buying or selling a firm, I would trust you would dig a little deeper than that.

Philippa Gee is managing director at Philippa Gee Wealth Management