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There are many characteristics you can associate with the UK's IFA sector but stability is certainly not one of them.

Individuals who continue to make a living as a financial adviser work within a constantly shifting landscape which often makes forward planning if not impossible then, without doubt, difficult.

In purely regulatory terms, no sooner has the ink dried on one set of rule changes before a crisp sheet of paper is waiting on the desk ready for a new batch to be written and implemented.

Then there are the market developments and constant product updates to deal with, the technological advances and the new systems and processes that must be introduced to keep pace with this constant change.

In no uncertain terms, we are dealing with a profession that has been buffeted and knocked around - some would say, even messed about - over a sustained period of time.

Given the swings and roundabouts nature of the IFA sector it can sometimes seem a minor miracle that we have such a large number of firms conducting substantial volumes of business with strong client databases delivering professional, quality advice. These firms have grasped the bull by the horns and continue to maintain their profitable status in the face of an inordinate amount of challenges that would floor many other types of business.

Uncertainty is a constant within the profession and firms must work within this environment as best as they can. The fact remains that both the regulatory and economic environment in the UK is unlikely to change any time soon and there are significant numbers of firm owners who are trying to put in place an 'end game' while at the same time continuing to run a profitable entity.

This business dilemma has been recognised by some significant players in the market and consequently we are seeing the rise of the 'consolidator'. These companies are offering successful IFA practices the opportunity to share in the economies of scale that come with a larger offering while at the same time delivering a valuable 'exit strategy' for those firm owners eyeing their future.

For some firms joining a wider group may be viewed as a loss of independence; yet the more progressive consolidators in the market are certainly not there to purchase the firm and turn it into something it is not. The deal has to be right for both parties: the consolidator is looking for businesses which match its own values and culture. In my eyes, this means a real synergy in terms of a focus on good, quality financial advice and its delivery to the client base. In turn, the IFA firm is perhaps looking to consolidate the value they have already created within their own practice and/or looking to exit the industry in the near future

Where the IFA business is clearly strong and profitable, it makes little sense for a consolidator to move in and impose an alien brand or culture on the firm. A lack of central interference may be high on many IFA firms’ lists of what they want from the relationship with the purchasing group. They will also want to know that they ‘fit’ with the group’s ethos and that similar types of IFA practices will make up the group rather than a disparate bunch with differing models and goals.

For some, a key reason for the firm's purchase will have been its ability to meet two key drivers in our valuation model, namely recurring income levels and maintainable Ebitda. If these drivers are met and the business meets all other expectations, then widespread changes would not look to be made. Indeed, in most cases, it makes perfect sense to maintain the status quo with the same brand and the same management team staying in situ and driving the business forward.

Some, but not all, consolidators are looking for IFA practices which have adopted the recurring income method of working rather than firms which are, for the most part, transaction based. This means firms must have long-standing relationships with their clients and a history of creating ongoing income streams. If this is in place, firms can expect the consolidator to provide support and services which help boost their ability to bring in that recurring income and grow the underlying profitability of the business. Other consolidator groups have preferences for high initial income figures, or large numbers of advisers.

It should be clear to all that the consolidator option is not going to be on the table if the firm is not in the best of health. Consolidators are looking for well-managed, profitable businesses - they are not interested in firms which do not meet their financial expectations. This is all about understanding the value that currently exists in a firm and developing that business with the addition of core services which can be delivered from the consolidator group to the individual IFA practice.

One of the greatest strains in terms of both resource and investment on an IFA practice is meeting its regulatory responsibilities. The need to maintain compliance during a period of shifting regulation is not easily achieved and many firms have fallen because of this particular burden. One benefit of the consolidator option is the opportunity to take the compliance services from the group, moving what is normally a burden and drain on the practice to a more pro-active function; one, which if worked correctly, can deliver further commercial opportunities.

The idea of a strong consolidator group is to remove the obstacles and handicaps the IFA firm may have been struggling to overcome. These handicaps are not just regulatory but may also take in areas such as the back-office system the firm currently uses, which again could be a resource and investment burden. By working with the IFA and taking these potential handicaps off their hands, this leaves the firm able to dedicate resource where it is most needed, namely the provision and delivery of advice. This allows the firm to service clients knowing full well that its responsibilities in these sometimes difficult areas will continue to be met.

Given the economic situation and the regulatory pressures that many IFA practices find themselves in, there is no shortage of firms that are considering their 'exit options'. Having a strategy is certainly a pre-requisite for all firms; without it there is a difficulty in setting goals for the firm and ensuring all opportunities are grasped.

By working with a consolidator group the IFA firm is benefiting from its exit strategy while at the same time continuing the work that has made the practice successful in the first place. And remember that during the years post-purchase a firm should continue to be rewarded for their ongoing work. There must be an incentive scheme in place to ensure the firm continues to write quality, profitable business.

There are many considerations for IFA firms at this time, but for successful practices there are a plethora of options to consider ensuring they get the most out of their business and its value. The consolidator option will not be for everyone, but for those looking to partner with a group that can offer stability and a range of services which increase profitability whilst reducing the burden, the benefits are clear.

Damian Keeling is Managing Director of Perspective Financial Management