Is now the right time to sell your IFA business?

Is now the right time to sell your IFA business? In the ever-changing landscape of financial services, it can be difficult to know when the right time is to sell your IFA business. It may seem like now is a poor time to consider your options due to the recent economic turmoil, but is that really the case? What are the reasons that make now a good time to consider selling your IFA business?

Market Demand

The demand for Financial Advisors is currently experiencing a surge as more individuals and businesses seek the expert advice of IFAs. As a result, the market has seen an influx of prospective buyers looking to acquire established quality businesses with an existing client bank signed up to fee based ongoing servicing. This increased demand on the market means that Acquirers are offering attractive and highly generous valuations for the right firms in order to be competitive. Now is an ideal time for you to consider selling to ensure you achieve the best valuation possible for your IFA business.

Changing Regulation

The burden of increased regulation such as Consumer Duty can put a significant strain on Independent Financial Advisors. It can be financially and time demanding and can draw attention away from your servicing existing clients and marketing to new clients. Selling your business now to relieve the pressures of running a business and continuing to advise post-sale is a great option to obtain a capital event that takes advantage of the current hight demand, whilst freeing up time for you to dedicate to advising.

It may also be advantageous to sell your IFA business before any further changes or increases to the regulations are introduced. Should the FCA introduce more changes including concerns about the impact of the FCA’s capital adequacy proposals, if they are poorly applied, there is the potential for the acquisitions market to become inundated with sellers looking to unburden themselves. An influx of sellers could reduce competition on the market as buyers may not feel a need to offer such attractive propositions in order to be competitive. Waiting to sell could mean you miss out on obtaining the best possible valuation for your IFA firm!

Consolidator Activity

Currently the Financial Advisor market is witnessing a trend of consolidation, with larger firms looking to acquire smaller businesses and expand their client bank. If your IFA firm has a strong client bank and is well-positioned, it could be highly attractive to larger firms seeking a strategic acquisition. A more stable economic environment will likely renew this activity into 2024, however impending regulatory changes or interest rates remaining high for Consolidators whom leverage finance could begin to slow consolidator activity as the year continues. Acting now to take advantage of this current activity could be wise to ensure you secure a competitive valuation for your IFA firm.

Your Timeline and Goals

Selling your IFA business can be a highly personal and emotional process. Carefully consider your personal goals and your ideal timeline to determine if the current market aligns with your aspirations for the sale. You may be looking to retire, pursuing new opportunities, or considering a change in your lifestyle. Whatever your reasons for selling your business, aligning your personal goals with an acquisition is key for a smooth and successful sale.

When determining your personal timeline, it is important to keep the future in mind with regards to current market trends. Often sellers decide to continue working for a year or more to further grow their business and maximise their capital event, however this can be detrimental in the long term if the market changes. Multiples are currently high, but there is no guarantee how long they will remain at this level. Consider carefully how beneficial delaying the sale of your business will be compared to taking advantage of the current high multiples before the market changes. Furthermore, running a business can be extremely demanding for the owners’ physical and mental health and can cause a litany of personal issues. Many small businesses are highly reliant on the owner so when that owner becomes ill the business will also struggle and make it harder to carry out the necessary due diligence requirements required by an Acquirer as well as carrying on business as usual.

Conclusion

Timing is crucial when selling a business. The current market conditions and increased consolidator activity makes the current acquisitions market highly attractive to those considering selling their IFA business. Prospective sellers should consider acting whilst multiples are high to ensure they are achieving the best possible valuation for their IFA business. The market is unpredictable and with the potential for regulation changes to be introduced later in the year, now is the opportune time to reap the rewards of you years of hard work and dedication!

Considering selling you IFA business? Why not get in touch to discuss your options!