Legacy products and old platforms in a sale
Old pension plans, closed funds and clients spread across a dozen providers take time to deal with, and a buyer will want to know which of them you have reviewed.
Old pension plans, closed funds and clients spread across a dozen providers take time to deal with, and a buyer will want to know which of them you have reviewed.
A firm that has advised for twenty years has clients holding products from every stage of that history: personal pensions from the 1990s, with-profits bonds, closed funds, policies with providers that have since been taken over, and accounts on platforms the firm no longer uses for new business.
Each legacy product is a question for a buyer. Is the client being served on it? Is the fee on it fair value? Has anyone checked whether it has valuable guarantees or penalties on exit? If the answers are not on the file, the buyer has to assume they are unknown.
Legacy products also add work. A buyer has to deal with each provider separately, learn each one's process for changing the adviser, and chase each one for valuations. A firm whose clients are spread across many providers costs more to run, and a buyer allows for that.
For each client, list every product they hold through you: provider, product type, date taken out, current value, how you are paid on it, and when you last reviewed it. Then sort the list by provider.
The list usually shows three groups. Products on your current platforms, reviewed regularly. Products held elsewhere and reviewed. And products held elsewhere and not reviewed for some time. The third group is where to start.
Some older contracts carry features that would be lost on a transfer: guaranteed annuity rates, protected tax-free cash, guaranteed growth rates, or a with-profits guarantee at a set date. Before anyone proposes consolidating, each of those needs to be identified and recorded on the file.
A buyer will want to know that a client holding such a product was told what it contains and chose to keep it. A buyer who plans to move clients onto its own platform will need that information before it advises anybody to move.
Where a review shows that moving a client's holdings would serve them better, give that advice, write the suitability report and make the move. Where it shows that keeping them is right, record the reasons.
Do not consolidate to make the firm easier to sell. Each move is a piece of advice and has to be in the client's interest. The aim is a file on which every holding has been looked at and every decision has a reason.
Clients can stay on a platform after the firm has moved its new business elsewhere. Each of those platforms still has to be logged into, reconciled and kept up to date, and each one needs its own process when the firm changes hands. For each platform, record the number of clients on it, the total assets, and whether those clients have been reviewed against the platform you now use. Where moving is in the client's interest, advise them to move. Where it is not, record the reason.
Some clients hold a product with a provider who still lists your firm as the adviser, even though you have not advised them for years and they pay you nothing. Those records create a risk. The client may believe you are looking after the product, and a complaint about it could arrive at your firm.
Write to those clients, explain that you do not provide an ongoing service on the product, and offer a review if they want one. Ask the provider to remove your firm from the record where the client does not take up the offer. Record the exchange on the file.
Some products taken out before the end of 2012 still pay trail commission. Whether that trail continues after a change of firm depends on the provider. Ask each provider in writing. A buyer will value trail income according to how secure it is, and some trail ends when the adviser changes.
Equity & General's administration team handles the provider work when you join: valuations, adviser changes and chasing. Trainee advisers work through clients who have not been reviewed, update the file, and hand each one back to you for the advice. The legacy holdings get reviewed in that work, while you are still the adviser making the decisions.
Client data goes to a buyer in stages, and what the clients are told and asked to agree to depends on how the transfer is made.
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Most of the preparation for an exit can be done before your staff, your clients or a buyer know you are thinking about it.
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If you could not work from tomorrow, your clients, your staff and your family would need a plan that exists already.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.