The buyout market for retiring advisers who sell their businesses is changing shape, according to a recent report by the brokerage RetiringIFA. The company says that, these days, acquisitions seem to be led by larger scale businesses which are making acquisitions in an effort to ramp up funds under management, or perhaps to achieve a more diverse presence across the UK.
The result, it would appear, is that although consolidation is still happening at the smaller end of the IFA spectrum, the smaller fish are getting harder to attract. The brokerage says it received only 34 approaches from UK sole traders between January 2013 and August 2014, compared with 90 a year earlier. And that the average (achieved) sale price grew to £693,425 during the year ended August 2014, from £386,425 in the year to August 2013.
Averages of sold businesses brokered by RetiringIFA (August 2013-2014):
Average turnover: £367,000
Average trail: £202,500
Average FUM: £51,300,000
The average sale price was equivalent to 1.8% of funds under management, RetiringIFA says. This ratio has remained stable over the last couple of years.