Originally published on ProfessionalAdviser
5th June 2025
https://www.professionaladviser.com/opinion/4414505/financial-intermediaries-achieve-successful-succession
Roderic Rennison is an M&A consultant who works with and for financial planning firm owners to achieve their succession goals. In the first of a series of articles for PA, he looks at what enables businesses to achieve enhanced and lasting value…
This is the first of a series of articles that will examine what enables financial intermediary firms to achieve enhanced and lasting value, and the steps that they should consider to consolidate their position as they progress towards succession in the business.
That may eventually be a sale, a management buyout, setting up an Employee Ownership Plan or some form of family succession. What is the most appropriate outcome will evolve over time but there are important steps to be taken along the way, which will enable these decisions to be made with informed knowledge and confidence.
This article considers the first of these, establishing the appropriate legal foundations and having a plan setting out the vision for the future growth of the firm and its delivery.
Before the firm comes into being, careful consideration needs to be given to the most appropriate legal structure. All too often, the founders opt for a structure without first giving thought to the longer-term legal and tax implications. In most instances, if there are going to be at least two founders, the choice will be between setting up a limited company and a partnership.
In companies, the Memorandum and Articles of Association are legal documents outlining the company’s constitution, while partnerships generally rely on a Partnership Deed for similar purposes. The Memorandum of Association for a company records the intention of the initial shareholders to form a company. The Articles of Association detail the rules governing the company’s operations, including the rights and responsibilities of members and directors.
Conversely, a Partnership Deed in a partnership sets out internal rules, including capital contributions, profit sharing, and partner relationships. The Memorandum and Articles of Association for a company are like the constitution and bylaws of the organisation, while the Partnership Deed for a partnership is a single agreement that covers all internal rules and regulations.
It is important to take professional advice and, in particular, where there are equal shareholders to incorporate clauses that clearly set out the remedies where disagreements and disputes arise.
Relying on a standard wording may prove short-sighted. For that reason, there should also be a shareholders’ agreement put into place. A shareholders’ agreement is a private contract between the shareholders of a company that outlines their rights and obligations, including how the company is run and how shares are managed. It is essentially a legally binding agreement that clarifies the relationship between shareholders and helps prevent future disputes.
Many firms come into being because the founders find themselves in a position that is untenable in another firm, perhaps following a sale, or a difference of opinion with others. It is important to have a plan, and to set objectives, albeit these may be quite general at the outset.
It is important to be clear what the purpose of the plan is and what is seeks to achieve.
A strategic plan is a high-level roadmap for the future, often covering say, three to five years, and helps business owners set priorities and make informed decisions. It is likely to contain a mission statement, a vision statement, SWOT analysis, (strengths, weaknesses, opportunities, threats,) strategic goals and objectives, and consider what resources will be needed
A business plan focuses on the short-term, operational aspects of a business, including how it will be structured, run, and grow, while a strategic plan focuses on the long-term direction and goals of the business, considering market trends, business needs, and internal resources. Business plans are often used to secure funding or convince investors, is more detailed and specific, typically covering a year or less
In the early stages of a financial planning business where perhaps there may be two or three advisers setting up the firm, there should be both a strategic plan and a business plan; these plans may not be especially detailed at the outset, but where there is more than one owner/shareholder, it is vital from the outset, for there to be agreement about the vision for the new business, and what both the short and longer term objectives should be. They should be set down in writing.
The phrase “what gets measured gets managed” is a well-known management principle, coined by Peter Drucker, a management consultant. Plans that sit in the proverbial drawer are of limited benefit to any firm.
They need to be reviewed regularly. In the case of a business plan this is likely to be at least quarterly and probably monthly even from the outset, and for strategic plans, a review annually or every two years is likely to be effective.
Seeking help and assistance is not a sign of weakness; it is the opposite. Obtaining professional support from the outset is likely to enable a new firm to grow more quickly and make fewer potentially costly mistakes along the way. That said, the support should be targeted and provide value for money. If you are asked to pay retainer fees for any service, ask what you going to receive, and be clear what the cancellation terms are.
In my next article, I will be looking at the levers of value, i.e. what makes a firm more – and less attractive. In the meantime, if you have any questions, please send them to me at [email protected]
Roderic Rennison is a founding partner at Catalyst Partners