Ep.128 - Bought Out, Pushed Out, or Wheeled Out: Brian Hill on the Reality of Exits

This is Advisor 3.0, a show designed to help you as a financial advisor, elevate your professional practice, transform your client lives, and take your business to the next level. I am Abraham Ocaslaya, welcome to the show. Everyone exits. You're either bought out, pushed out or wheeled out. That's the title of the book by my guest today. Brian Hill who is former financial planner, ex-fascist, I was still saying that. But ultimately the founder of Pathfinders, Brian, welcome to the show. Abraham, thank you so much. Really pleased to be here. You're a repeat guest on the show. We don't have many of those. So you must have something really invaluable to tell us. Or people have forgotten. No, I don't think so. But no, seriously, thank you for making the trip and offering to share your wisdom on the show. So first of all, let's talk about the book. I really like the title. You've clearly been on the journey of cellular business yourself. And now you've been in the business now, five years of helping other financial planners do the same. So give us the background to the book. Why this book and why the title? Let's start with the title first. All credit goes to my father, who's in his mid-late 80s. Now he started off on the printing shop floors in Northern Ireland and worked his way up through management and ownership. He owned, he was owner of the pitman press as it used to be now in the bath press on the lower Bristol road. And he took it from through private ownership through to MBO, through to PLC. And eventually he gone through all that process. And then the French came in and he was pushed out. I remember the conversation having the conversation with him when this broke. And it was the front. And a cover of what you might call the tabloid print press of him exiting. And when I asked him about it, he said, well, you know, Brian, rather bought out, pushed out or will date. And I was pushed out. And that was when was that? That was in the 90s sometimes. And it's all, it has lots of phrases like that which really stuck with me. And so we decided to use this. I've used it all the way through my financial planning career and decided to use this for the title of the book. Because it holds true then for him holds true knife for us as well. And we are wearing that face in financial planning when, you know, firms and I don't think he was this much many firms this, you know, say, say 10 years ago, but firms are now proper formidable businesses. There is wealth, you know, there is capital value in these businesses. There are buyers looking to pay for these businesses. And in a way that wasn't around, you know, several years ago. And one of the points you make in the book is that, you know, many of us financial planners haven't thought about all of the factors that you need to think about as you are looking to to exit a business or sell a business. That's right. And that's, you know, what I'd have all the exams and qualifications that I ever took and that you've taken that people listening to this colleagues and comrades have taken to listen to this. They teach us how to be good or even great financial planners. No one teaches how to run a good or great financial planning business. And definitely know them teachers how to sell or transfer a good or great financial planning business. So one of the problems that we face today and we faced when I saw my business is that our confidence exceeds our competence. What I mean by that is we are highly competent of being financial advisors. We are highly incompetent at selling a financial advice business. And that's not anything bad to say. It's just your incompetence is defined by your skills. You know, people would broadly say that I'm a very competent skier. I'm a very incompetent tennis player. I've met quite happy with that. But when we try to apply the same methods that we use to even run a financial planning business to selling one that's like trying to get a fish to ride a bicycle. You're kind of going in the same sort of direction. It's entirely different things. And that's why I'm trying to be kind when I say this but not all DIY business cells are bad. But most of the bad business cells I've seen were DIY. And one of the things I struggle with really is that financial planners are the financial planners were the first ones to say the clients take advice. They're going to be a reduction of row, be independent, look at the whole of the market. But often financial planners don't take their own advice. They don't either own medicine or what was it David Crowzie or said the other day said, eat my own dog food. I'm not sure where that comes from. But you know what I mean? This is that sort of idea is that if you're telling clients that this is they should be represented. They should take qualified advice, experience advice. And it comes to sell their own business that maybe they should do the same thing when they don't it tends to come on stock. And why do you think that is, you know, is this you know, you go is this pride is it just that we are transferring our expertise in one domain to another domain that it doesn't really apply. Exactly right. And the phrase I would use here is you don't know what you don't know. And I would invite anybody to come and watch us go through the process of taking a firm to sell in all the firms that are taking the firm to market and going all the way through. If you could you know it is it is unbelievably in the end depth to do it properly. And all the firms that we've worked with. I can tell you how many were get ready to go to market when they came to us zero. But none are ready. There might be ready for looking after clients. There might be ready for compliance. They're not ready to go to market. And so we spend a lot of time usually three to six months getting a firm ready to go to market data, legals compliance financials all need to be lined up and heading in the right direction. To be fair most time mine wasn't when I saw my business. But what we have then is businesses which are ready to go to market and they've got all the ducks in the road one of my clients set me the other day. The owner of business sold trade out 108 million AUM for one guy. He said in 30 years I've never known so much about my business. He said that's that's a bit worrying is that. But we're looking at it through the commercial eyes of a buyer. And if you're not ready to go to market we're not going to take you to market until you fixed stuff. You know whatever that might be legal as financials regulation. So let's talk about the steps. You know when when you know say you're building a firm you know disembassness with your team clients. How should you start to think about this ultimate exit and what it might look like and where would you start from from what are the steps that you take to get to a point where actually you are ready for. So this is such a good point and the phrase I would use with this is never get yourself into anything you haven't first worked out how to get out of that includes business planes marriage also flu not marriage. So let's work out how we can get out of it if it's not a revolving door particularly. The revolving door scenario is like buying a selling a house you're going to buy one then you're going to sell it and you're going to buy another. Define benefit transfer not so much. Yeah selling your business definitely not so much. There's very few people who go through the process more than once. You know I'd name 99% you're only ever going to do it once so. So what can you do well you kind of build with the end in mind I suppose if we if we have that ability which is what do I want at the end of it what I want to be left with at the end of it is a legacy is it a lump sum I can invest the like an ignore the 4% rule for is it I want to hand something down to my client to my staff, to my family, what looks good and work back from that, like the financial planning process. Yeah, you're going to retire at age 57 and however many months and I want to be on 45 grand a year net after everything. I never want to run around my money. Good financial planning conversations to have, we apply it to the business in the same way. When's and one of the key things of this is to look at when's the earliest I can achieve this and then I maintain when's the latest by which time I have to achieve this. So it gives us a time frame which I had a conversation with a guy the other day and he said Brian I've got you but really enjoyed it but I'm not looking at X-ing for 10 years. It's great you're a bit late and he says what you mean you're going to pay for that. I said that's 120 paydays to get your stuff in order. What do you need to do now? Actually you've got 120 opportunities to get things in order. What are you going to do and he said a handful of it like that. What's the point? You talk to your clients about this all day long. So yeah but I just hadn't applied it to me. It's a bit like putting on the oxygen mask. You know when you're sat on the plane I'm more easy to do. You're more sort of British Airways fresh. And they say put your own oxygen mask on first. So as a financial planner you're used to putting on client's oxygen masks for them, aren't you? As a financial planner you need to do some work for yourself and your family and your staff. When we're engaged by firms I look at it that we're engaged by the firm on behalf of the clients. So although we're engaged by a tarman Margaret as the shareholders for instance. Actually we're working on behalf of their clients to make sure the transition works in a way that makes sense and that it's still going to be looked after in that least as good a way as that they have been so far. So certainly back in we need to start with the end of mind. What do you need to achieve when the earliest you can achieve it? One of the firms were working for it in the minute on our exit ready stay ready program which means we get them ready to exit for markets quickly as possible even if they're 5, 10 years away. They want a three that currently the value that 3.8 million their target is 5 million. Using the the deep analytics that we've done on the business they can achieve that within maybe 12 to 18 months and then they can maintain that but it requires some work you know to do. It's not an overnight thing at all requires some change and the mindset change as well. To give an example that one firm is spending 57% of its time on 16% of its revenue. 16% of its revenue. All of which is lost making. So that means in simple terms I like to explain it in my own brain in simple terms. That means we're going to work on the Monday and by Wednesday afternoon or we've worked all the way through to Wednesday lunchtime we've lost money. All that time effort all the stuff all that time we spent losing money. Wednesday afternoon through the Thursday 5 p.m. we're breaking even I mean they're going to be going to be uproar on on Friday. That makes absolutely no sense commercially so why don't we just work Fridays. That's overly simplistic but that is mirrored across which the every financial advice firm I've seen apart from one which we're taking to market at the minute where they've a sole trade of has managed to you know they've got two clients which are lost leading, lost making but pretty much everyone else it's a real challenge. So let's talk about this this things that affect the value of the financial planning business. What are those things? Why is it that this firm that you're talking about is spending 60% of their time, 58% 6% of their time on 18% of clients that are not profitable. What are these things these drivers that you see impacting the valuation of a financial planning business? So some of you all call it a long tail I call it a long drag which is you know it slows the growth of the firm tremendously where this comes from and I hadn't my firm as well is these are the clients you took on in the early days usually. I remember when I had my first client come in and have 50 grand to invest and I was the dog's whatever you know and I thought that was great. Fast forward two years after that. What tubers that doesn't pay the bills you know and we tend we don't like to let go of people but all we like to keep them close and that in them in them itself creates its own problem and it's the self fulfilling prophecy in the end and then people what people tend to do so tend to people clients tend to recommend people like them. Yeah you know see if you've got ultra high net worth clients they tend to recommend ultra high net worth clients do and there's also the what I find is the you never know problem tell me about the problem is you never know and I remember ex colleague of mine Martin saying this to me where he had a client in there at like 25 grams with investment delivering that and they had no they were delivering a full service 25 grand. I said this makes no sense he says you never know what you mean you never know. There might win the lottery, there might get inheritance as yeah you never know. I do know you know the chance of that happening is slim to none in the meantime you're depriving the business of your time because you can only look after say 100 households 200 whatever your number is that's the number of slots that you have available to you to look after clients and if 20% 30% 50% of those are lost making then if you're happy with that then you're happy with that but it drags the value down and all the buyer will do will look at that and go unless we've got a way in which we can service those clients usually remotely. Very like touch. I appreciate appreciate the FCO doing and looking at this in more detail. Then they will market down and I've seen it where buyers have said a year later right all these clients you saw that were low value gone. A thousand pound or less per annum or under 100 grand AUM sorry under 1000 pound OAC or under 150 AUM we're not set up to look after them you know at all so we're going to transfer them across to somebody else you know so it comes through a bit of a legacy but of a long tail I'd also come through people not looking at the commercials of their business you know which I do understand they've been there myself that they don't look at the commercials in the cold light of day how much does it cost you to deliver full financial planning for each client assuming you know in different categories whatever they are what's the cost one penny under that you're paying for that client to be a client does that make commercial sense have the conversation you know decide if it doesn't what do we do about it and in my business what we did was when we went through that process we realized that there were quite a few clients like that and so we either turned them off completely or for a few we said there was only maybe six or seven spaces for those clients who were vulnerable we didn't want them going off to the bank or something like that and we zeroed our fees completely we didn't take any money at all but we still provided the service for the same service for them but when you do that and you realize that actually that is a complete loss it kind of focuses the mind and so what you're doing in this program is UILP infarms do these things that a buyer would do eventually by making the hard choice that decision as to what to do with this long tail of clients that they can no longer serve properly, profitably if you see what I mean okay what else do you see impacting values of client what else you know I've heard about you know DB transfers you know what else have you seen in your work with firms impacting value issue so DB transfers absolutely we still probably got a threshold of about 15% of the valuation which can have a bit of an impact an increasing impact and although you can have a firm that has 15% of DB transfers that goes through and one that has 5% that doesn't go through because of the quality of that so one of the biggest pieces on this is have this stuff checked have it externally objectively checked if someone says yeah we check it internally so it doesn't wash a tool you're policing your own stuff need to have it checked externally because the bar will do it. Absolutely. I had one on the train here this morning. Contact with the bar. Can we have 40 files, please? 40 DB files. OK, that's exactly. And we are ready for that. We knew it's going to happen, because we've done what we call pre-dil. So before going to market, we spent this from three, four months just getting everything together and making sure it was all in the right way. But to answer your question in terms of what dilutes the value, DB transfers, low average value, AUM, or FIES. So if you're below 150 grand average AUM, you're just going to see a lack of interest from bars. They are businesses. They're not here to do you a favor. So and if you're trying less than, say, 1500 quid, you're going to struggle. So one of the firms were working with it in a minute. The average value per household is 1440, 1440, per household. Through the work that we're doing with them, we're changing that, no extra staff, and no additional work required. We're increasing that to 2,790 average per household. And they get a cash injection of almost, I think it's about 788 underground into the business. And everyone can work one day less. And they will see no change to the business at all. Because the dilution comes from that long tail. Yes. Yeah. That we're talking about. So DB transfers, long tail, low averages, and irreplaceable owners. irreplaceable owners. They were talking about that one second. And complexity. Complexity kills deals. Now, one of the big things where huge fans of is, where financial planners outsource what they do to those who are better at it. So we were timeline users. I remember I still have a picture somewhere, Abraham, of my desk with the timeline graph above it that I would bring people in. And when they would say a particularly new clients, one of the prerequisites for them being a client was they understood how we worked. And I would take them up to this amazing chart. And I'd show them all the ups and downs over the last, over the decades, and say to them, look, your portfolio will go up and it will go down. Don't thank me when it goes up and don't blame me for this day. Right? And they'd go, oh, that's very clever. Yeah, don't, honestly. So we would never get calls. Virtually any time when we had changes in portfolio values because of external, racial style impact. And so what we find is buyers like simple boring vanilla businesses. I love that. Because it's much easier to integrate. And before we started this, I was saying to you, one of the biggest challenges where deals go wrong is during integration. People haven't thought this stuff through. So if you're running your own CIP, you're running your own portfolio. So if you're doing individual stocks and shares and stuff like that, that is going to change. Whichever buyer, no matter what they say, even if they say, yeah, we're going to keep that trust me, they will not. That will change rapidly. So you can't really let go of that stuff and not be precious or bored of. Which then-- I'm going to put that on a plaque. And make it a companion to go with the chat. No joking, but-- But that's what it is. Because I know if I'm a buyer, I've got someone else's cellar. And they're using your stuff. Well, I'm using your stuff. That's great. No, it's nice. Easy, nice. Easy to transfer. No change for clients, no friction. Because integration issues come with-- the more friction you get, the more attention you get with both clients and staff. And so I never believe it when people say there's no change. It's rubbish. Of course, there's change. When you move from one boat to another, something's going to change, just after. So we just need to be honest about it and understand that there will be change. But the cellars don't always know the right questions to ask and buyers may not be all that forthcoming. So replaceable owners, if you made in the book. Talk about that. Oh, dear. I really get started with this. But the best replaceable owner I've got, one phone, we've got, you're throwing it at the minute. Going through it at the minute. The owner doesn't know all the staff's name. It's a fair-sized business, two million paint, ebit.al. They don't know all names of the staff at the minute. People come, people go. But more importantly, in this-- Yeah, he has his own entrance into the building. Into the building. He has his own office that is separate. And this is probably one of the best-run businesses because he is delegated. They have an internal CFO. They've delegated what's the phrase, only do what only you can do. And so he's delegated everything to people. And so when we as financial planners, we have this confidence thing. And we just try and do everything. We do it one second. We're doing the IT. Next thing we're choosing the CIP. Next thing we're meeting clients. Next thing we're writing contracts with staff. We're polymaths. We do all this business. So we're poly-replaceable. Then that curates gaps. Because you can't possibly do it all well. But we just can't do it all well. We've got a dog called Tyson. He's a boxer dog. And he is an escape artist. He's amazing. We're trying to shore up all the holes in the property so he doesn't get out. And he watches us. What do we do in that? And he cops his head. I was having a chat about the half-a-bend at this morning. But anyway, Tyson, you've heard the phrase, dog with a dog with a bone. So if you're at a tennis ball for Tyson, he'll just look at it. And with saliva, jump and down. And he moves it around. You throw it to it. Throw it to him. Gets it, comes back. Throw it. Gets it, comes back. As soon as you throw a choice of two things, you throw a ball and a stick. You cannot move. He stays there. Ball, stick. Just looks at it. What do I do? What do I do with this? And so the phrase I come around from this, from myself, if not anybody else, is being more Tyson. Being more Tyson, we're all lentless focus on one thing. And so to be a replaceable learner, we need to give this stuff away. To people who, even if they do it 80% as well as you do, that's better than you doing it. If we, let's make it commercial. If you're spending, it makes me weep. When I read it on Phil Calvert's Life Talk Facebook, that I suggested people join us, and our members are ready. When you see advisors say, I was holding on the phone for half an hour to XYZ Company to do a final with less authority. Like, you're earning 100,000, panning. Why are you doing that? Yeah. Other people, systems and processes, what are you doing? But it's in the nature of where people have given themselves a job. Is it a business? I know some lifestyle. But are they replaceable? Very often, it takes a bit of work for them to become replaceable. And if it's any consolation, when I saw my business, it took three advisors to manage what I was managing. And I was like, how did I do that? Well, I delegated really well. I would say it's one thing I do do is really well to delegate. And my staff used to call me Captain Slopey Shoulders, where they would-- anything came across my desk. I couldn't-- I tried to eliminate it, so it never happened again. I couldn't do that, I tried to automate it. I couldn't do that, I just delegated it. So what I suggest here is don't be highly effective. Be lazy. Be super lazy. I just give that stuff to other people to do. And they can do it better than you anyway for the most part. If you've employed-- if you've employed or engaged, people are correct. Cool stuff. Now I want to pick you up on a part of the book that had my head spinning. So this is about the acquirer. So let's talk-- so we've done a lot of talking about-- or we've spoken about the cellar. Let's talk about the buyers in the marketplace. And I know there are different types of buyers. But one of the things that you said in the book was about this issue of margin uplift potential for buyers. So you see these consolidators coming into the marketplace. And they want to buy financial planning businesses. But they want to make money not just from the advice, but from the investment element. And one of the points you made in your book is that-- If you have built what you and I would call hard call financial planning business where the value is in the planning and let's say you're charging 1% for the planning and you're delivering for your client full cash flow, you know, all of the coaching that comes with it, all of that stuff, full fat planning. And then as a result, as part of that proposition, you have also brought down the cost of platform, of platforms of investing. Let's say you've managed to condense the cost of that to 30 basis point. You made the point in the book that these buyers have lower potential to make revenue from the investment, the product side of things. But also they will price your plan, they'll value your business based not on your revenue, let's say, 1% or 1%, but on the 60, 70 basis point, whatever that might be, which might be lower than yours, I can't get my head around this. So please explain. Okay, so when buyers look at a business, they're quite rightly going to look for, and quite understandably, look for commercial uplift, whether you buy it if you think of someone who's going to buy a property, if they're a professional property buyer, they're rarely going to go by brand new bar at home. Right. Yeah, they're going to go by something that needs a bit of work. Depending on the appetite, depends how much work they want to do. Is it a ruin? Maybe that attracts some sort of buyers, or maybe it just needs a liquor paint and some more paper and new floors, whatever it might be. So the way the buyers will price is they will either price at your current revenue level, so we'll put the investment to the side for the next current revenue level. So let's say you charge 0.6%, they charge 0.75%. They're going to price you at 0.6, not at the 0.75. However, if you're charging 1%, and they charge 0.75, they're going to price you at 0.75. Yeah. Because one of the things consumer duty is shown that we need to have fair value and needs to be consistent. You can't have, unless you've got delivering complete, very different services for different people. You can't have that misalignment on there. So they're not going to pay you when they're going to have to be dropping those prices, but equally on the other side of it, if you're charging 0.6, they're charging 0.75, well, they're not going to give you that. They're not going to give you that. Yeah, of course not. That's like saying, well, I bought a house for, I sold my house to the developer of 500,000 and they're going to then sell it for 750,000. So they're going to pay me, of course they're not going to do that. You know, they're going to pay what it is today. So there can be particularly with some professional buyers and the problem is the way I turn this is, heads you when tells I lose. Right. Head you when tells I lose. Which means, if I give you an example of that, some buyers will say, look, we're good and buy Abraham's business at a million-pain recurring revenue. Now if as part of the deferred consideration that we give on this, that you're one of its less, we're then going to pay you less on that payment. And you're two, we're going to pay less. But some buyers will say, but if it's higher than a million pains, we're not going to pay you on the uplift. We're only going to pay if it goes down. It's a bit like the, the, when I was in the police, the caution that we used to give people, they still give today, which anything you can say, what was it? Anything you can say, we'll be used against you. Or for you, it will only ever be used against you in a court. And so with, with this, with some buyers, they say, look, million-pain graph in your face below that, sorry mate, we're going to have to have a drawback. If it's higher than that, we'll keep that. That's quite common in a lot of deals. We always negotiate that. It's completely unfair practice. But they say, no, we'll, we'll keep that. So the key here with this is that when you have the high advisor charge, low investment charge, there's not very many places for them to go commercially. Where's our, where we're going to make extra margin on this? Because if you think about it, when you're buying multiple businesses, you've got, you've got economies of scale. Yeah. But if they've already swiped that out, where'd you go with that? It just makes a business intrinsically less attractive to potential buyers. Now, there is the other side of it where you have strategic buyers who are just looking for AUM or fees because they know that if they are at say, a billion AUM and they can get to two billion AUM, they go from a multiple of say 12 times a bit dark and multiple of 15 times a bit dark, just because of the scale. All right, so we do have that. But at the smaller side of the marketplace, particularly the local buyers and regional buyers, they just didn't have that flex at all. So one of the areas of caution for people is to say, look, I do understand about driving down the cost for clients, albeit that I don't think clients care. I really don't think they care that much. And you could be doing yourself out of future valuation by being overly aggressive and trying to drive down these fees for clients. I just don't think it's commercially as prudent as people perhaps think it is. Notwithstanding, if you're great, driving costs for clients, fine, I get that. But from a commercial point of view, in emergency acquisitions, not so much. So there are different buyers in the marketplace today. If you had to put these buyers into different categories, how would you categorize them from the point of view of a potential? What came into my mind then were sharks. But no, no, I don't mean it like that at all. But there are some sharks. For sure, you're in the, it's not overrun. I use too many analogies on this. But you're in the sea in the some sharks, some jellyfish. They look pretty, but they will sting you. But let's put it in a more geographical coverage. So you get national regional local buyers. And again, nationals are covered in the UK, people like MKC, Perspective, etc. They're nationals, regional players, strong regional players and then local players, local buyers, maybe just starting it, maybe use one or two acquisitions. The interesting thing is you read about this time and time again. You go on, say, I don't want to be bought by a consolidated. It's kind of consolidators. They're just going to rip the sole down a bit. Sometimes that is true and I have seen it. Not on our watch, I've seen the eggs, eggs, externally. But the toughest firms, the toughest acquirers, those where it's most likely to go wrong are not the nationals. All the regionals is the local, small buyers. You know why? They don't know what they're doing. So particularly with a DIY deal, you've got a seller, it doesn't know what they're doing. Bar doesn't know what they're doing. Had one potential deal. A few years ago where sellers had really wanted to sell bride to this local buyer and I said, okay, how did you know them? What do you think? Can they give this story? It's like, okay, well, we're going to put them through the process. And that involves me having a talk with a guy referred to it as an interrogation. I was a victim interrogation to be fair. And the seller wanted to go through with this. With this buyer and I said, I know, it's just something about the way he carried on the conversations. He wants to deal with the seller direct. It's a really bad idea. You lose all leverage when you deal with buyer's direct. And you've got no negotiation, a very little negotiation position at that point. And I said to the seller, how many red flags do you need to see before you don't go into water? And he said, I take what you're saying, but whenever someone puts a button, a sentence to negate everything else I've said before, it's a but. I really like him. I think we can do the business together. And in the end, this buyer pulled eight, a local buyer pulled eight six weeks before completion saying we can't access the funds anymore. Absolutely. And I just had this bad feeling about it, this particular buyer all the way through. So where else people might be concerned about consolidators? There's bad eggs in every, it's a phrase, I don't know, in every plate. There's always a bad egg somewhere, right? Doesn't make them all bad. But that's why it's important to go through a process. So for instance, the way that we found where my business was sold was you go through a broker or buy side broker and they introduce sellers to you. Sorry, then she's biased here. You pay. them commission. So it's restricted sequentially. So let's say Abraham go and meet bar A. How you get on? Right? Didn't work out. Okay, here's bar B. How'd you get on? Here's bar C. Okay, it's completely wrong to do it. That's like saying we're going to have people come around the house. Do you want to start the first one? Yeah. No. Okay, right. Second one. We don't do that. It's the best way to do it. It's a simultaneous where you get it's like dragons, Dan. I was a reverse dragon. Dan. Right. Yeah. All the buyers come in at the same time with the same little information within a time frame. And they have to put the best foot forwards. And they know that in a pathfinder process, they are competing against each other. Drives the value right up in terms of overall deal structure. But just in terms of bar A sort of good off topic a bit though. There are local regional nationals. There's a good the bad and the ugly with this. And one of the things that sellers don't know is they don't know they can't they don't know who's who. They just think they're already well. We have a nice chart. And yeah, we think this can make this work. And here we go. Absolutely worst way to do it. And in fact, we require a bar is to put in offers before they meet the sellers. Right. So we usually have 68 maybe 10 offers before they meet. And the reason for that is as part of my masters in behavioral science, I realized on my research that your chance being able to work someone out based the face in terms of their them as a person is no better than the flip of the coin. In fact, you're more likely to get it right with the flip of the coin. So I don't want buyers to meet sellers until we've seen the text in all the right boxes, that they use transit. They use time. They're going to take on the staff. They're going to be above this threshold. Then you can meet them. Otherwise what's the point? So we have a process rails to run on that we know where it's time and time again. Yeah. And that's the point I wanted to that I was going to get to but you go to it. But I just wanted to do it in for sizes, which is you said in the book that one of the worst things that people do is they just go and have a friendly nice chance of friendly nice coffee with a potential seller. Oh, sorry, potential buyer. And you said don't do that. Don't do that. Please. Don't do that. Stop it. Immediately, buyers are professional buyers in the main. They know that if they get on well with you and they say, look, everyone, nothing do they change. I'm just looking at the same. You can give the staff. You've lost all your leverage. You have no negotiation position at all. And the buyer is a professional buyer and you're a novice seller. You don't know. They're just going to crunch numbers. And their role is to get the very best deal for them, not to get the best deal for you. I remember being in a meeting with a buyer and seller because we manage, we're highly controlling. We control all of it. And I said to the buyer in the meeting, what's the buyer was out? I said, partway through this, the buyer is going to say, we don't pay the most. The buyer went right around and said, you can't give away our trade secrets on this of how we negotiate stuff. Because we set multiple negotiations with these buyers. We know where their touch points are very often. So the going to have those conversations, speaking to buyers direct, is and going DIY, I can't tell you how much it makes me weak when I see this because it's now had a message through from someone the other day. So Brian, I've gotten a signed head. Do you recommend a solicitor? Oh my god, he's serious. Please shoot me now. At the very least, you engage a solicitor before you sign heads, heads of terms, it's non-binding. But it says this is the terms of which we've agreed to deal. And you haven't, you've done it yourself, your life's work, your staff and your clients, and you've done it by yourself, you've never done it before. That's like trying to get a hole in one because you think a golf ball is similar to, you know, you play football. And it's the same sort of thing comes back to confidence and competence. The other thing that I wanted to pick on is this issue about buy side brokers and how much of an issue is it is. The way I think about it is today more than financial planning businesses are fee-based and not commission-based. So the client pays us and we've come from the commission product commission land. But my sense is when it's flipped around, in this case, when the financial advisor is or should be the client and she's the one selling, my instinct is that she would rather someone else pays the fees. At least that's the story that she'll tell herself which is by the way. I mean, oh, why don't the seller, so why don't the buyer pay the broker so he doesn't come out of my money. Whereas if I engage Brian, he's going to charge me some preparation fee to get my business ready and then he's going to want a cut of the fees which will come from my value. But it's easy if I get the buyer to pay. So there is no imaginary possible that the bar calls on to say this doesn't affect the price that we're going to pay for. The seller always pays. It's the same as when you have in the old days when we saw lots of life insurance, you could sell it with commission or without. If you sell it with commission, then the advisor, indemnified or non-demonified gets paid. If you sell it without commission, then the premium drops proportionally. It's no free money pot on this. So and a buyer has used the commission as part of their capital expenditure. It is a cost. It's not free. And therefore they know every single time if they have no broker to pay, the deal changes proportionally. So the seller always pays. It's just if you go through a buy side broker under the law of agency, that broker must fearlessly represent the buyer. Must fearlessly represent the buyer. They have fiduciary duty. They represent the best interests of the buyer. They always know that they see it that way. But they have to. Which is a little bit like. Abraham selling his house, starting to move to Cyprus. It's good. It's in America. It's going to sell his house and you've got one buyer to come around and you're engaging the estate agent who's engaged by the buyer to come around to represent the best interests of the buyer. Are you going to do it? No, of course you're not. That's insane. Or you have to go to court for some reason. You're engaging a slister who is paid for and contracted by the other side. Of course you're not. That's insane. But this is what we find here is that, and virtually all the brokers in the market are buy side. So they have contracts. So this creates a restricted marketplace. First of all, those brokers won't engage with buyers. However good they are, if they don't pay them a commission, they'll do it. So it creates a restricted marketplace. And secondly, the variability of commission. And sometimes the reason that the biggest could verify, the solidest of the biggest because they pay the highest commission to the brokers. That's why. So when I went to meet different buyers when I saw my business, I rock up, have a chance. Well, this is nothing like my business. Why say to the broker, why are you sending me here? Well, the meeting lasted 10 minutes. And there's only afterwards, I realized, because they sent me to the highest paying commission ones first and then the rest. It creates completely uneven playing field. You are then the product. So if you get cold cold like I was today, as I was saying, outside, I got a firm, how it's called, by a by-side broker to sell my firm. I thought I had sold five years ago. I sold my business five years ago and they say, we've got a buyer in here. You do not have a buyer in my area. Yeah, it's really been fascinating. Fascinating talking to you. Thank you for sharing your wisdom. There's this final question I want to ask you. Otherwise, before we get kicked out to the studio, which is this? So the work you're doing is helping professionalize this process of exiting for firms. But if you stand back and look on a whole scale at the professional financial planning, where we are now having, I was looking at the FCA data recently, there is in 2024, a drop in the number of financial advisors, a small drop and even smaller drop in the. Sorry, and even bigger drop in the number of farms. So in the last 20, so in the last 20, in the last five years, we've lost something like 20% of financial advice firms, which does mean firms are getting bigger. Some of the lower, so some of the smaller firms are selling to bigger firms. Is there anything that is concerning in this picture, in this trend of financial planning firms being sold to larger consolidated? Is there anything that worries you or that we should be worried about or that we should think about? So I think to just turn that question around slightly, my answer is that it gives great opportunity for small farms, where maybe where people have been sold to a bigger firm and I think it doesn't fit, to create something really special, in terms of the, whilst keeping it simple, whilst keeping it not complex, to build something which really matters to clients and to the local community as well. This consolidation will only carry on, and a lot of it is driven by the age of the average age of the financial advisor and the amount of regulation that they have to deal with, it's like constant layers upon layers of simplification, if you like, where I see this just, I don't think anyone sees it getting any less, you know. So, but I do think it creates an opportunity for those who are commercially aware, for those advisors who want to set up small, powerful, boutique-y types of firms, not to serve as the mass market, as for someone else I think. But to look after 100, 200 households each, be super efficient, delegate where they can, and create businesses that create value for themselves and their clients, they're all, and creates a significant opportunity whereas those firms which are now being sold and acquired, you know, those are now off the market literally, and then reduces competition in many ways. I think it creates both opportunity and threat. Fascinating, fascinating stuff. Brian Hill, thank you very much for your time. Thank you for your wisdom. Thank you for coming on this show. Really enjoyed our conversation. My pleasure, thanks Abraham. (upbeat music) That's it up on today's show. Massive, massive thanks to my production crew, especially G. Oshar, Melissa Kanam, and the entire team. And of course to our sponsor, Timeline, the market leading provider of integrated planning technology and model up for full use of this to advisors. I do hope you've been enjoyed today's show, head over to Apple Podcast and give us your review there. Until next time, goodbye.