Last week, we commented on the fact that there are only 2 492 sole proprietors in the industry, based on the latest FSB statistics.
One reader, speaking from personal experience, wrote as follows:
It is very possible that there has been a reduction in sole props, AND THERE WILL BE MORE. They have not disappeared, but are simply operating through, or off, the back of other intermediaries. This alleviates a lot of the admin and getting the required guarantees, etc. There are many that have merged their books but still manage their own portfolios.
A major concern for many was that, after so many years of working and building up a practice, something unforeseen happens to you, and your business is gone. Some, like myself, changed from sole prop status because of this.
We have in the past expressed the opinion that joining forces with other like-minded (and principled) individuals, makes a lot of sense. Shared overheads, and business creation for each other, are but some of the benefits of such a venture. There is also no need to relinquish your independent status or client base.
This week, I also received an enquiry from a reader who sold his business, and wanted to know if he can now operate as a key individual for a business where the key individual still needs to pass his regulatory exam.
The idea certainly has merit, and can be a lifeline for many who are quite despondent at this stage about the future of their businesses. There is, as always, also a downside to this.
The individual who takes on such a responsibility exposes himself to serious risk. Unless he requests a comprehensive compliance audit of the new business, he has no real idea of what transpired in the past. Even then, there are dangers, such as business transactions not declared in the audit, as we saw in the recent Herman Pretorius saga.
The FSB is also highly sensitive to “rent-a-license” operators, in the light of what happened at Sharemax.
The whole issue has come to the fore again, with another article on Moneyweb concerning a scheme purported to pay a return of 13% to investors. Please click here to read the article.
Perhaps the way forward is to stick to what you know – both in terms of business, and what happens (and happened) in your practice.