Top tips on valuing your IFA business today

Photo of Debbie Dry, Head of Integration at Wealth Holdings
Photo of Debbie Dry, Head of Integration at Wealth Holdings

I think it’s an important point to make that each of these points could be turned into a positive OR negative from the buyer’s perspective, depending on what they are seeking to do with the clients and assets post acquisition. This is another reason why, at Wealth Holdings, we carry out so much detailed due diligence on both parties prior to any introduction. It’s because the devil is in the detail: what adds value for one buyer might be a deterrent to another.

When Wealth Holdings first onboards a seller, we collect some redacted information about that seller’s client bank. This is shared with the potential buyer even before the first meeting so that they have a deeper understanding of what they are valuing. This information includes:

  • Clients listed per household – i.e. They may have 100 clients but only 50 households because each is made up of husband and wife
  • Age or date of birth for each client (I always request the DOB but sometimes sellers are worried about that being an identifier in the early stages so age or even age bracket, i.e. 40-45).
  • Post code or town for each client
  • Portfolio valuation for each client, including provider, wrapper and value
  • Fee rate for each portfolio
  • Regular withdrawals/drawdown
  • Provider

Most sellers are surprised when this level of detail is requested in the early stages – but once I explain the above (to both buyer and seller) then for the most part everyone understands the value of doing this work upfront. I honestly don’t know how you can value a business on a blanket multiple with only the value of the recurring revenue. All these other factors should be considered. I don’t think we are representing either party well if we don’t explain all this upfront. I also believe that once an offer is made, it is more likely that the deal will reach a successful conclusion. That’s because there shouldn’t be many surprises in the due diligence stage (from experience this is where most deals fall apart because something outlined above is uncovered and found to be incompatible with the buyer’s model). This also doesn’t slow the process down either. Most sellers are able to pull this information off their systems at the touch of a button and are able to provide it by return. The ones that can’t do this will immediately raise a red flag to me. That’s because it raises the question of how are they running their businesses without a handle on their clients (we are only requesting this for their engaged clients after all)?

In summing up, when considering any sale or acquisition of an IFA business there are so many different aspects that need to be considered. The value of having the support and guidance of an experienced practitioner working alongside you who can help you to steer the most appropriate and effective route towards a solution, is likely to mean a far better outcome for you, your team, your business and your clients.

Debbie Dry is Head of Integration at Wealth Holdings.

For further information: 

If you are interested in learning more about this, or any other aspect of buying or selling an IFA/Wealth Management practice, or if you simply want to better understand what you should do to make your business “market ready” in future, feel free to get in touch with the team at Wealth Holdings for an informal chat.

Wealth Holdings’ Head of Acquisition is Norman MacLeod and he will be happy to oblige or to refer you to a specialist colleague if appropriate. Norman can be contacted via the website, by email or on his mobile – 07851399995.

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