True Conversation:

Steve: “It’s a great business NAME, it will be a good acquisition”

Buyer: “Yes but all of the best clients are already using our DFM”

Steve: “Exactly, that’s another plus point, you shouldn’t lose many clients at all here should you?”

Buyer: “No, the thing is, I don’t think we need to pay for them, we already have them”

Steve: “NAME, just because they are using your DFM doesn’t mean they are your clients…. If I sell this elsewhere you will not only lose a great advice acquisition but you will also lose the money out of your DFM when the IFA introduces the funds elsewhere!”

Buyer: “Well we have had them three years and because he’s retiring I think we fancy our chances…. what else have you got Steve?”

Interesting…

Legally your clients are your clients but then there is the law of the DFM jungle.

When you position someone as an expert at running money and let them build a relationship with your best clients you are relying on that person sticking to the spirit of the agreement and not just the letter of the law.

Be cautious about entering into any DFM relationship, particularly those that promise to pay you a multiple at a later date.

Why? Well what if they find a reason not to effect the sale at some point?

What happens to your funds and your value then? Who else would want to buy into a fight?

If you’re already in a relationship like this then do you have first charge on the assets of the DFM if they fail to purchase as promised?

Thought not.