In the first blog of this series, we’ll be talking through what steps sellers can take to prepare for a sale which was taken from our latest YouTube video “Top tips when selling an IFA Business part 2” (0:28)

What can sellers do to prepare for sale?

1. Cut out the guesswork 

One thing that sellers can do to prepare for sale is having the right data in these situations is really important as this will save not only time but also stress during an already difficult process. Guesswork in these situations will only slow down and delay all processes frustrating all parties and pushing that retirement back, which we’re sure will be tricky to explain to family and friends! You can start this time-saving process by preparing for the process as much as possible. 

Gary Venner, Managing director of IFA Acquisitions says on this “We as a vendor would ask for this information… we would ask the vendor to very much make sure that their files are up together”

Although you should not share the client’s names and personal details, as this would breach GDPR regulations, an anonymised list of information would be useful. Some of this information could be:

  • Amounts of money invested
  • Recurring income
  • Fact finds
  • Most recent recommendation reports for past advice
  • Money laundering
  • Data protection declarations
  • Client fee agreements
  • Location (particularly if it’s high net worth clients that would continue to receive face-to-face advice)

One thing that will certainly help is making sure that a vendor has a good handle on their clients, as a broker would certainly ask for this information. This can either can be provided on a spreadsheet or if somebody has got, for instance, intelligent office reports that can be pulled. We look at servicing reviews as it’s important that we know where those clients are geographically based. We also look at the type of the product plan, the plan type, and the product provider.

Alex Canham who is a Partner at Herrington Carmichael commented on this from a legal perspective “One of the key things that is music to our ears as lawyers is people being able to access accurate data relating to everything across their business. Because when you get into the diligence phase, it gives confidence to a buyer, when they see that it’s readily available, is accurate and it’s in good order as well.”

2. DB pension transfers

The same diligence applies with file checking too, especially with regard to higher risk areas of investment, such as DB pension transfers, we would look at and probe much more on those. Making sure there’s sufficient information available right from the off on those arrangements is paramount. We would want to know the value transfer, the seeding scheme and the ages of those clients as well. “Certainly, if there were a lot of transfers done for people younger than 50, we would start to question that.” Says Gary “And the rationale behind those transfers and I think if taking that stage further has external auditors, a compliance audit has actually had a look at those higher risk areas as well.”

And that might be a good preparation to consider getting that done to make sure that you’ve got an external compliance look at making sure the gold standard was actually achieved that as well.

3. Get someone to look over your files

Following on from that last point of external compliance, Alex said on this “I think there’s a lot to be said for that actually in terms of having somebody come in and actually look at the files because all too often, especially where you’re busy running the business, you’re doing things the best of your ability, but having an objective opinion on how good your files actually are, especially if perhaps there are smaller firms, probably quite a good thing to do.”

This is a great point and by doing this you are ultimately adding value and making your business a lot more appealing and approachable to a buyer. Although the acquirer will still put their own due diligence team in it will really kickstart discussions much earlier and help generate much more interest in the business as well.

It is worth noting that due diligence to this degree is not exclusive to share purchases, even when looking at asset purchases, it is still important that this is done. Especially on the recurring income, good accounting records are always needed as well.

4. Look at the service propositions

Another key aspect when looking to prepare for a sale would be to look at the service proposition. This will inevitably be lower valued clients, a good question to ask yourself is “Are the clients being segmented into different types of service propositions?” because it is important that they can continue to provide a service for an appropriate cost as well.

A key thing to consider is that it depends on how long the process is because, as you know, some may decide to move that fee structure upwards and certainly it may increase the valuation by doing so. But if a client suddenly has an increase in fee and then in six months’ time they’re going to be sold, then that probably is an alarm bell.

5. Look at the differences between you and the acquirer 

As part of the information, look at the difference between platform providers and service propositions and things that the acquirer has got in place at the moment.

We are increasingly seeing buyers looking for more alignment to the acquirer’s centralized investment proposition, which inevitably they will have in place. Or an opportunity for a smoother transition / handover period which can be achieved by following the above steps. So client banks that are overweight in bonds, for instance, are probably not going to be as attractive as more modern solutions, which are platform-based.


What can sellers do to prepare for a sale?

To conclude, there are many steps that sellers prepare before a sale. To recap:

  1. Cut out the guesswork
  2. DB pension transfers
  3. Get someone to look over your files
  4. Look at the service propositions
  5. Look at the differences between you and the acquirer

Make sure you’re staying up to date with both the video and blog series here at IFA Acquisitions,  we have a multitude of videos and blog that could be helpful to you :

If you are thinking about selling or buying an IFA Business, get in touch for a free no-pressure chat using the below: