How to Value a
Wealth Management / IFA Business

N o two advisory firms are the same - each are unique, just like you and your clients. To provide a one valuation metric that fits all business models is unrealistic. Instead, a matrix of factors determines an achievable valuation.

Factors that influence valuation and their implications

Is this an asset or a share purchase / sale?

Different taxation principles apply influencing costs to acquire / sell.

Profitability

A robust profit will always command a premium valuation.

Client age demographics

Capital accumulation or drawdown. Life expectancy?

Client charging structure

Commercial viability of ongoing service.

Compliance history

Evidence of non-compliant trade will limit acquirer appetite and numbers.

Client service proposition

Clarity and simplicity is important. The absence of structure damages value.

IT

Orderly client records make for transparent DD, accurate valuation, and ease of onboarding / integration.

"Sell & Go" or "Sell & Stay"?

Valuation metrics vary - EBITDA, Recurring Income multiplier or % of £FUM

Geography

Client location and adviser servicing capabilities.

Investment proposition

Compatible alignment of vendor and acquirer models for TCF / ongoing servicing.

Aggregate portfolio size

Average investment portfolio & client numbers for servicing.

Legacy advice

Potential future liability will influence PI cover / premiums.

Attitude to "High Risk" product promotion.

Portfolios comprising disproportionate levels of "High Risk" product promotion achieve discounted valuations.

In Summary

T he above isn't exhaustive instead some complexities surrounding the acquisition, sale, and integration of an IFA's business that you should consider. All influencers on price.

As with any market the simple rules of supply and demand apply. A decade in this sector has taught us the best deals are the simplest where both sides to the transaction respect the clients' interests above all other factors.

If you would like to understand more how to value a Wealth Management / IFA Business as a buyer or seller why not contact us?

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