Selling your IFA business is a significant decision, often laden with emotion. To maximise the value of your IFA client bank, it’s essential to approach the process from a buyer’s perspective.
One common pitfall when selling an IFA business is not adjusting your mindset. You’ve poured time, energy, and resources into building your company. The risks you’ve taken, the relationships you’ve nurtured – they’re all part of your business’s DNA. It’s your creation. As you prepare to sell, you naturally want the buyer to recognise the care and dedication that have made your business successful.
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1. Adopt a Buyer’s Perspective on Valuation
When selling your IFA business, it’s crucial to step into the shoes of a potential buyer. While you may place a high emotional value on the years of hard work and dedication that have gone into building your business, buyers are primarily focused on the tangible opportunities and profitability your business can offer them. This means that features you consider valuable—such as long-standing client relationships or a bespoke service approach—may not hold the same weight in a buyer’s valuation. Instead, buyers will closely examine the financial performance, client retention rates, and scalability of your operations. To maximize your business’s appeal, you need to present it in a way that aligns with what buyers are looking for: clear, demonstrable profitability and growth potential.
2. Let Data Tell Your Story
Having data is only the first step in selling your IFA client bank. You need to understand what the data reveals and be able to clearly convey that story to a buyer. High-quality data should show how your client base is segmented, the differences between these segments, and where the value lies. Ensure the data is comprehensive, transparent, and easy to analyse. A robust back-office system that organises client data into a cohesive structure will help address your buyer’s questions effectively.
3. Focus on Profitability
For buyers, the size of your clients’ portfolios is a key factor because it drives profitability. Buyers will want to know how purchasing your IFA business will enhance their financial performance. They typically seek an average portfolio size exceeding £200,000. Analyse your client data to identify where the most value is and present that in a way that appeals to potential buyers.
4. Benchmark Salaries: Understand Your Team’s Value
Your team can greatly influence the outcome of your IFA client bank sale, either positively or negatively. If your team members are self-employed, a buyer might see them as a risk or as a costly way of operating. For the buyer, this presents two challenges: adopting your cost structure and integrating your team, possibly at a different pay scale, which could lead to discontent or additional expenses. Benchmark your team’s salaries to anticipate and address these issues.
5. Standardise Your Services and Charges
While you may pride yourself on providing bespoke services to your clients, a buyer might not be able to replicate this approach. The simplest way for a buyer to retain your existing IFA clients is if those clients receive a standard package of services at a fixed rate. Reducing service variations makes it easier for a buyer to integrate your business, increasing its attractiveness.
6. Minimise Risk to Enhance Appeal
Nothing derails a deal faster than compliance risk. Buyers are not looking to take on risky defined benefit transfers or uncover questionable practices during due diligence. They aren’t interested in how you’ve turned risk into profit. The ideal IFA business for a buyer is one with minimal compliance risks. Address any potential issues before you put your business on the market.
7. Decide Your Role Post-Sale: Stay or Go?
In the past, selling an IFA client bank often meant a complete exit. However, there’s a growing trend of business owners staying on to work in partnership with larger firms, recognising growth opportunities that wouldn’t be possible alone. Determine your desired role before entering negotiations and ensure you’re clear about how the deal will be structured, particularly regarding future profitability and your involvement in the business.
8. Futureproof Your Business
How well is your IFA business structured? Have you evolved from a one-person operation to a larger team without investing in the necessary infrastructure to manage the increased complexity? Have you kept pace with technology to improve back-office organisation, data management, and client communications? A modern business that fully leverages technology for back-office integration, cashflow modelling, and comprehensive financial planning will be far more appealing to a buyer.
The success of an IFA client bank sale can be influenced by many factors, some of which are beyond your control. However, by focusing on these eight areas, you can make your business more attractive to buyers and increase its value throughout the acquisition process. Thinking like a buyer is crucial for maximising the value of your IFA client bank.
I'm Ben Spratt the Managing Director of Retiring IFA, a broker specialising in the sale of IFA businesses. Retiring IFA is built on strong relationships founded on trust, credibility, and value.
If you’re considering selling your business, learn more about the process and how Retiring IFA can assist you. Book a meeting with me
