The most recent version found that ‘champions’ – firms that maximise their use of technology – generated 44 per cent more revenue and 59 per cent more ongoing revenue per adviser and have 28 per cent more clients and 48 per cent more assets under advice than ‘explorers’ – firms that do not yet fully use all the functionality available.
Evidence of systems and controls – from a governance as well as a performance perspective – is increasingly central to the due diligence process that buyers will carry out. Whether the acquirer will continue to use the same providers and processes or migrate to its own preferred systems is a question for the selling firm to consider too, given the implications for clients.
Similar considerations will apply to centralised investment propositions and the various investment-related arrangements in place. The technology ecosystem and the options available – in terms of customer relationship management systems, tools, software and platforms, for example – may well have a bearing on the perceived value of the firm.
Being able to evidence effective integration and a clear understanding throughout the firm of how to get the best from the technology available will make a difference too.
For instance, a selling firm able to demonstrate how true two-way integration enhances the firm’s efficiency (and so gives advisers more time to add value for clients) has a stronger case for the longer-term profitability and sustainability of the business.
Demonstrate robust cyber security
Sustainability is also about resilience. More than ever, this means protecting the business against cyber security threats and reducing its vulnerability to breaches that could have profound ramifications for its ability to function.
There is a governance aspect here as well as a business performance angle. Being able to handle and process client data properly helps maximise efficiency, streamline the advice process and bolster productivity.
On the other hand, taking a purely reactive approach and falling short of the expected data and systems security requirements creates the risk of potentially punishing regulatory action.
The most serious GDPR infringements, for instance, can result in fines of up to £17.5mn or 4 per cent of annual turnover – just one reason why acquiring firms often pay very close attention to cyber security and data handling processes.
The vast quantity of sensitive personal and financial information that advice companies typically hold on clients pushes the costs of poor data handling practices even higher.
In the post-Covid environment, there may be an additional requirement to demonstrate the measures put in place to reduce cyber vulnerabilities. UN data show that cyber crime rose by 600 per cent in the first three months of the pandemic alone, as online scams sought to exploit the network weaknesses created by the shift to remote working.
