To Sell or Not to Sell: Should You Let Your IFA Firm Be Part of an Acquisition?

If you’re ready to sell your Financial advice firm, the jury is out on whether or not now is the right time – we weigh up the pros and cons…

To sell or not to sell? That is the question many independent Financial Advisors are asking themselves when contemplating the future of their businesses.

The changes financial advice firms have to embrace this year are inevitably putting pressure on some companies and there has been some consolidation in the market of independent financial advice already.

More consolidation is predicted as Financial Advisors struggle to keep up with the reforms in the industry.

To Sell or Not to Sell: Should You Let Your IFA Firm Be Part of an Acquisition?

Why you should sell

For Advisors on the brink of retiring who do not want to transition their business away from commission and towards fees, or who cannot face the prospect of more exams, selling their business before the December 31st 2012 Retail Distribution Review (RDR) deadline is a clever way to side-step the changes.

It is common for buyers of one-man-band businesses to retain the key Advisor for a number of years in a consultancy role. This benefits both the buyer and seller as the seller carries on working while helping move their old client bank over to the new firm.

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There are a number of ways acquired firms are able to work with the buyer; either through management share option schemes or operating a satellite office.

One key reason to sell is the fact that the financial advice profession is moving to a recurring income model. In order for companies to be profitable in a recurring income world they need to be able to be scalable.

Growing a business is not an easy task and smaller firms may not have the resources to dedicate to it – although the creation of a Business Development Manager role in a company could solve this problem.

Why you shouldn’t sell

Selling a business that you have put so much effort into developing is hard for many Financial Advisors, and now may not be the right time to sell.

Financial Advisors have been professionalising their businesses over the past five years, transitioning to a more stable fee-based business model. For those that have made the changes already, selling now would be a waste of time and effort.

Advisors who are able to function in a post-RDR world will see the value of their businesses increase substantially and if they have their business model right they will find themselves at the helm of a profitable company.

The other important point about selling is the price that Advisors will receive for their firm. Those who sell this year are likely to get far less for their company than those Advisors whose businesses make the grade of RDR and are still operating in 2013.

If the market is swamped with Advisors trying to sell their businesses then prices will be squeezed ever lower; it is a simple case of supply and demand.

There are buyers out there

Large consolidation firms are still snapping up firms. Perspective recently acquired a £27 million client bank and Sanlam Private Wealth bought three firms to take its assets under advice to £700 million.

Succession has also recently completed the acquisition of five firms for £12.5 million.

For those who want to sell now there are opportunities to do so but there may be greater opportunities if Advisors wait until next year.

For more advice on financial services jobs, download our free eGuide ‘Print Out and Keep: What You Need to Know About Qualifications Before Your Next Financial Services Job Interview’.


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