How do I get the most value from my IFA client list?

After a successful career as an independent financial adviser, you might be starting to think about moving on and stepping away from the heavy responsibilities of the self-employed world. Sometimes, though, selling an IFA business is easier said than done. After all, you’ve built your business from the ground up, acquiring new clients and building a great rapport with them over the years. They trust you and have most probably been coming to you for financial advice for a long time, so it’s not easy to cut ties. It’s important to plan ahead when it comes to selling your business. It can be quite a lengthy process. You should consider aligning yourself to a business 3-5 years before you wish to exit. This is vital to ensure that your clients remain happy and your trust and relationship with the business remains strong.

It’s not going to happen overnight – but by making sure you’re prepared and have a clear plan in place, you can ensure each stage of your sale runs as smoothly as possible. It’s important to be well informed about what selling an IFA business entails: it’s complex, and there’s a lot to consider, from tax implications to business integration. In this blog post, we take a look at how you can get the most value when selling your client list so you can make sure you sell your business at a fair price that reflects all the hard work you’ve put into it over the years.

Where to start

So, where to begin? Well, one of the first and most important things to do is determine the value of your business. This depends on a number of things, such as its size, level of income, and the overall structure of the company. But without a doubt, your client list is the main asset of your business and is, therefore, core to your success – and your value. Selling your client list for less than it’s worth could have serious consequences on your income post-sale, which is especially important if you’re planning on retiring – so it’s definitely worth speaking to a market professional in order to gain an accurate valuation.

 Identify the highest price

There’s no one-size-fits-all method when it comes to valuing your business, and your calculation will ultimately depend on your individual situation. However, you should be able to come up with a range of values that your sale price will fall between as a guide. To calculate the highest value, you need to carry out an analysis of your annual revenues. The most common way to value your client list is by using your yearly income, ranging from 2.5x yearly revenue for a low-quality firm, to 4x your yearly venue for a high-quality one. To obtain a sustainable profit, the basic ‘P/E multiple’ principle could be applied. This is where the price an acquirer pays will be a multiple of the average annualised earnings they anticipate. This ratio will give the number of years it will take for the deal to pay for itself. Talk to other local financial advisers too, so you can get an idea of what the ‘going value’ is in your area.

Finding the right buyer

Having a good relationship with the firm you are selling your client list to is also really important when it comes to your deal. The synergy between buying and selling parties can not only create a more amicable business deal, but also a higher purchase price due to funds being managed on similar platforms and equal back-office support systems. Also, the better your rapport and relationship with your buyer, the more likely it is that you will agree on a higher purchase price.

However, it’s not just your relationship with the buyer that’s important; it’s also vital that your existing clients feel at ease with the new firm and that a good rapport is built, to make sure they don’t decide to leave. It’s worth bearing in mind that its common practice for your buyer to stagger the payments – often over 2-3 years while you manage the transition.

 Manage the transition

Once you’ve found the right buyer, it’s important that you retain the clients on your list throughout the transition process. You need to protect your clients, and there are certain steps required to transfer and integrate your clients into your buyer’s business smoothly. If you have larger clients, you could consider setting up a meeting with them and your new buyer face-to-face to discuss the transition, their portfolios and how they will be affected. This will help ensure that their confidence in you and the new owner doesn’t falter as the transition takes place. It’s not just the larger clients you should speak to, though: make sure you alert all of your clients and let them know what to expect. Regular communications in the form of newsletters, emails and meetings will aid the process. After all, the smoother the process, the more likely your clients are to stay, which means you will get the best value from your business.

In conclusion, selling an IFA business can be complicated, but you can ensure you get the most value out of it by planning ahead and managing your client relationships. When it comes to selling your client list, the most important thing to consider is how it will be valued, which will depend on a number of factors:

• The size of the company
• Any assets you have
• Yearly revenue
• Where the monies are invested
• The current charging structure of the business
• The relationship between you and your clients
• The management of the ownership

By making sure you have a thorough plan in place, you’ll be able to ensure you get the best price. Again, remember to plan well in advance; a lot can go wrong when selling your business so start planning your exit strategy years in advance – whether you plan to retire or step away from your role.

At Recruit UK, we work closely with our candidates to ensure they’re getting the most they can out of their career. From getting the right salary to ensuring you’re in the right role for you, we assess every part of your job to aid you in the best way we can. So, to get a free career MOT from our expert team, just contact us. If you’re approaching the point in your career where you’re looking to exit the industry, we can put you in touch with companies that have proven exit strategies, so you don’t need to do this yourself. We want your exit to be as smooth as possible, so if you’re interested in finding out more about these companies, including those who are looking to hire financial advisers, then give us a call.