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Navigating the maze: The choices facing advisers planning an exit strategy


Directly authorised firms are becoming more attractive acquisition targets as nationals and networks roll out initiatives to help secure members’ futures after retirement.

Money Marketing revealed last week Tenet is to pilot a scheme aimed at helping member firms looking to sell their business and retire.

Separately, Succession has boosted its acquisition war chest with a £25m cash injection from HSBC. The firm has wasted no time in acquiring Beckenham-based Maze Wealthfor £1.2m, a week after securing the new funding.

As the buyers’ market for advisers looking to retire gathers pace, Money Marketing examines the options for advisers considering their business exit strategy.

Clean break

Figures from Retiring IFA suggest an active market for those considering selling up. The business has facilitated 33 deals so far this year with around six or seven buyers to every seller.

Managing director Henry Blunt says lengthy FCA authorisation processing times are driving an increase in interest in DA firms.


He says: “Because the FCA is taking nine months to get people approved there has been a real spike in people wanting to buy DA firms because they can get the permissions and plough on.

“There seem to be people banging on the doors on a day-to-day basis paying well over market multiples for small DA businesses. They have been going like hotcakes.”

Blunt says the most common deal is a “clean break” where the seller will receive a 50 per cent payment of goodwill upfront, which is usually a multiple of three or four times the recurring income, with the remainder paid over a 24-month term.

He says: “Normally it is 50 per cent upfront, 25 per cent at 12 months and 25 per cent at 24 months and the adviser does a handover period of up to 12 months before exiting the industry.”

Blunt has also noticed a recent increase in advisers wanting to stay on as part of the business for several years after selling.

Openwork marketing director Philip Martin says they are also seeing this trend. He says: “Increasingly we see a number of advisers who don’t actually want to sell their business but want to find a way of continuing to run it and keep a financial interest for a period of time.”

Blunt believes such arrangements can end up generating the best price.


He says: “There are some consultancy arrangements. They seem to yield the best prices so long as the directors are exiting within a two- to three-year period. You will get the best price but also the best levels of continuity.”

Openwork offers a buyout option similar to Tenet’s scheme and Martin says many of the smaller networks are starting to introduce similar programmes.

Under the Tenet initiative, the network will buy up one and two person member firms and fold them into its wholly-owned appointed representative business Aspire Financial Management.

Tenet managing director Mike O’Brien says acquired businesses will typically receive a multiplier of known recurring income between 2.5 and 3.5. Bought-out owners can receive introduction fees of around 20 per cent.

Martin says Openwork is working with firms more on “proper succession planning”, which he describes as getting new advisers into a business to sustain and grow it.

That concept is supported by Apfa, which says it does not take a stance on the best options for advisers wanting to exit or sell their firm.

Apfa director general Chris Hannant says the trade body has noticed more firms are arranging for their business to continue in some shape or form after the exit of a founding adviser.

Hannant says: “That is always positive if you are building a business, rather than just something that is built around you as an individual. The difference is a business has a robust life of its own and can outlast the life of its founder or owner. If it has been built with a future and is not 100 per cent dependent on one individual then it will have more chance of success in the future. That is quite important for clients.”

Continuity for clients is one of the most common concerns selling advisers have, particularly when many advisers have built relationships with clients over a 30-year period.

Martin says: “In many cases they want to make sure clients will be looked after. Very often that is a very key determinant in deciding which [exit] route to go down.”

Blunt adds: “The main concerns are usually continuity, someone coming into the business, changing the investment strategy and sacking some of the staff and how that will affect client retention.”

Another concern for advisers considering a sale is if they will receive all of the purchase price they have been promised for the business.

Blunt says: “We deal with firms that have bought before or have all of the finance because if they have got a track record of success, then you are far more likely to get all of the money. In our experience, if you go with the big brands who have got experience it is better than going with a small, local IFA who has never bought before.”

Hannant adds without a complaints long-stop many exiting advisers will harbour concerns about selling their business, particularly if they have operated in a partnership or as a sole trader where they would have a certain amount of liability.

Adviser views

Mark Meldon
Meldon & Co

I have a reluctance to sell the business to a third party if I don’t know and trust them because there is always this feeling they will turn over the investments and pensions that I have set up throughout my career. My plan is to bring in a couple of younger people to take the business forward in due course. A merger is another option and then you can exit the business gracefully but it would likely be with someone you know
and trust.

Nick Bamford
Executive director
Informed Choice

When you talk to advisers about selling their business, one thing that stands out  is the culture of the organisation to whom they will sell. When you have had long-term relationships with your clients you want a safe pair of hands to look after them. The trend seems to be around the amalgamation of clients onto one platform or discretionary fund management offering. That is not wrong but there is the fear that people will be shoehorned into the new proposition.



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There is one comment at the moment, we would love to hear your opinion too.

  1. Seller beware!

    Anyone contemplating selling should speak to someone that has gone through the process. Don’t be mesmerised by the figures being flashed around. As you can see from the article you may get half up front and the remainder will depend on not only the clients ‘sticking’ but also generating the anticipated income. It is therefore essential that you not only satisfy yourself as to the financial solidity of the firm to which you sell, but also that they have a compatible culture and ethos to you – otherwise you will find the clients walking out of the door and the negotiated and promised income will just a chimera. Seller beware!

    There are a host of other points and issues to watch out for and I could write a book on the topic. Suffice it to say it is in some respects similar to a marriage insofar as you decide in haste and repent at leisure. It really isn’t about how much you think you will get, but whether you are sure the clients will stand still for the new working practises and charges. A purchaser will very often have far higher charges that you have been levying and a very different approach to treating and servicing clients. In the main it will be small firms selling to larger ones and there is a world of difference between the two.

    This is but a brief introduction to the tortuous affair.

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