Just under half (44.8 per cent) of advisory firm owners could be looking to sell their business within the next five years, with potentially one in planning to do so in the next year alone, according to Harrison Spence’s latest IFA survey.
An online poll taken among the independent financial services consultancy’s community of advisers, which garnered 230 responses, found that plans to exit have been brought forward as the numbers envisaging they will sell have risen sharply in the past half year.
Six months ago 26.6 per cent were planning to sell within the next five years and just 5 per cent within 12 months. In addition, the number of owners who have no plans to sell has fallen to 37 per cent in the latest poll, compared to 57 per cent in April.
Brian Spence, managing partner at Harrison Spence, said that the instinct to sell is on the rise in line with the valuations attached to IFA businesses, which are on a general upwards trajectory as demand outstrips supply.
“However, if a glut of firms comes to the market over the next five years, prices may fall steeply,” he added.
The survey also found evidence that advisers recognise the greater influence to the value on their business of long-term strategic considerations, rather than short-term concerns such as the end of trail income in the near future.
Around 48 per cent responded that good business practice such as strategy, planning and cost control are likely to have a bigger impact on the value of their business than simple supply and demand (20 per cent) or external factors such as the cessation of trail (17.5 per cent).
Mr Spence added: “Increasingly, advisory firm business owners appreciate that rather than sitting back and waiting for the right price, the destiny of their firms is very much in their own hands.
“There are many steps owners can take to ensure that the true worth of their business is reflected in its valuation – and to persuade prospective buyers to pay more than current market value to secure the deal.”
peter.walker@ft.com
