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IFAs warned not to sell their firms too cheaply

IFAs should beware of selling equity in their firms too early, too cheaply and to people that cannot add value to the business, founder of Skandia UK Paul Bradshaw has warned.

Bradshaw told the Money Marketing G80 summit, near Newport, Wales last week, that the financial advice market was far from mature and said he expected in 10 years time the biggest IFAs would have market capitalisations in the billions of pounds rather than the millions now.

Bradshaw, who was most recently at product distributor Nascent in Italy, poin-ted out that Germany&#39s MLP has a market capitalisation of £3.1bn and Italian giant Mediolanum is valued at £4.3bn, dwarfing valuations of UK IFAs.

He said private equity investors are now more interested in distribution than manufacture but reminded IFAs that investment banks and venture capitalists expect an average return of 40 per cent a year.

Bradshaw also advised IFAs that their voice would be best heard by concentrating on detail in response to the FSA&#39s cost-benefit analysis.

He said: “It is bankers and lawyers who run the FSA now. They are trained to see emotion as weakness. You should concentrate on the cold detail.

“I know how difficult it is to resist a good offer but do not underestimate the value of your firm, do not sell your equity too early and sell to people who are going to add value to your business.”

Best Advice partner Paul Banfield said: “People that are selling out are making a mistake and there are surprises to come just around the corner. Wait and see is the best approach.”

G80 report, p9


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