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Almost 30% of IFAs looking to sell up within 5 years

Almost 30% of IFAs looking to sell up within 5 years

Almost 30 per cent of smaller advisers and sole traders are looking to sell up within the next two years, according to new research from a brokerage house specialising in the sale and purchase of IFA practices.

The key findings were that 71 per cent of those surveyed said that they would continue working within their existing businesses for at least five more years, while 24 per cent were looking to exit the industry within the next two years.

The remaining 5 per cent of advisers said they were actively seeking to exit the industry ‘as soon as possible’.

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Vision Business Advisers surveyed over 600 UK investment advisers, over 470 of which were sole traders, with most of the remainder being smaller practices comprising five or fewer IFAs.

Their analysis suggested that sector of the market has felt the biggest impact from the Retail Distribution Review, as the need to cut costs by outsourcing many administrative functions has affected profitability and working practices.

It found that the average age of the individual advisers was 58 years, with the oldest being 77 years and the youngest 31 years.

Peter Trotman, joint principal at Vision Business Advisers, said that the findings are consistent with what the firm have witnessed over the past eighteen months, but which does not appear to have filtered through into the wider marketplace.

“We have seen a significant increase in activity in terms of both sale and purchase mandates, not only from smaller IFA practices and sole traders who are looking to maximise the value of their client bases, but from larger organisations seeking to add critical mass by way of acquisitions.

“We believe there will be a significant number of active investment client bases coming onto the market over the next two to three years as the market experiences a prolonged period of consolidation,” he added.

He suggested that this presents an opportunity for larger firms to acquire attractive client bases at realistic valuations, particularly in light of the continued absence of bank assurance advisers and very few direct sales operations.

The research confirms that carried out by the Harrison Spence Partnership at the end of March, which found a similar number of adviser firm owners planning to sell up within five years.

The independent financial services consultancy surveyed more than 300 advisers in February, and found that 27 per cent plan to sell in the next five years, while more than half have no plans at all to exit their business.

Mr Trotman explained that the general election result should continue the current “buoyant marketplace” for advisers, but that those who do wish to exit, should probably look to sell sooner rather than later ahead of the sunset clause for platform rebates coming into force next year.

peter.walker@ft.com