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Red tape slashes IFA values

The value of IFA firms is plummeting, according to IFA Portfolio, and advisers can no longer rely on the sale of the business to fund their retirement.

IFA Portfolio says IFAs can now expect to receive less than half what they could have sold their firms for three years ago.

Research carried out for IFA Portfolio by headhunter firm the Seer Group found that general insurance broker firms are considered a better buy because they are not burdened with the same amount of regulation.

The fall in value is due to regulation, says IFA Portfolio managing director Ted York.

He says fear of unknown regulation makes an IFA firm a less attractive proposition.

Prospective buyers are not deterred by the pension review as they would not be accountable for these costs, he says.

But the potential of further investigations which could dramatically slash the value of firms is putting off buyers.

He says the cost of carrying out admin has driven the value of firms down as IFAs spend less time selling and more time doing paperwork.

With the average age of an IFA at 54, there could be a lot of firms up for sale in the near future, says York, but a lack of young IFAs who could snap them up.

He says: “It is important to develop a greater proportion of non-regulated business if one is considering a future sale. IFAs could sell medical insurance or household insurance to increase the value of their firm.”


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