Majority Of IFAs Would Sell For The "Right Price" - Survey

Stephen Little

27 May 2014

Nearly two-thirds of IFA business owners would sell their business for what they consider to be the right price, according to new research by financial services consultancy .

The study, which had more than 100 responses, found that 61 per cent said they would sell their business if they were offered the right price, despite the fact that 57 per cent said they have no plans to sell.

Harrison Spence said that many IFA businesses were holding back until valuations become more attractive, with most taking a five-year view.

According to the firm, IFA businesses have the potential to be hugely undervalued by conventional accounting methods. With many financial advisory practices setting up small lifestyle businesses with just one or two advisors, the focus is very often to maximise income for owner-managers, rather than boost profit for a corporate entity, and in some cases there is no real net profit, the firm said.

“The shift from income to profit generation is going to be a difficult transition for some IFAs, but the days of the lifestyle business are numbered. Rather than sitting back for years and waiting for the right price, getting a good valuation for an IFA business actually lies in practice owners' hands. There are many ways to build up a tangible profit stream and ensure that the true worth of a business is reflected in its valuation,” said Brian Spence, founder and managing partner of Harrison Spence.

“Some buyers are still offering prices on the basis of recurring income. This is becoming less commonplace, so those considering a sale should explore their options sooner rather than later,” he added.