In Focus: When Clients' Plans Change  

Time for a rethink of the adviser buyer/seller model?

Brian Spence

Brian Spence

An IFA broker was recently left hanging when a business it represented was sold without the broker's knowledge.

It turned out that the selling IFA was using several brokers on a first-come, first-served basis.

The debacle was embarrassing for the broker and unfortunate for the retiring IFA firm, as the broker was already in discussion with an acquirer in his network.

The consolidator/potential acquirer was disappointed as they had wasted time researching the business and were ready to offer.

As it turned out, this consolidator was willing to pay more for the selling business and had better systems and processes and long-term experience in purchasing IFA businesses.

We all know change happens - both to clients' plans and to advisers' business plans. So, to assist any would-be IFA business seller, here are my top tips for selling your business smoothly and for the right price to the right people:

1. Engage a specialist independent consultant/to work on your behalf. Brokers are usually paid by and work for the seller. A consultant will act on the sellers' behalf and work with the seller to present the business in the best possible light to a broad audience.

2. Ensure you give the independent consultant exclusivity. It is essential to the success of any sale. If not, you may find yourself in the same situation as my example above – resulting in a lower price and embarrassment all around. Generally, a broker receives commission paid by the acquiring firm. 

In other words, the broker is acting on behalf of the buyer, not the vendor/ selling IFA. How can an IFA selling practice expect to get a fair deal in such a situation? Vendors need independent, impartial professional help for what is, after all, one of the most important decisions of their lives.

3. Be willing to pay an up-front engagement fee followed by a success fee. Don't be afraid of paying a fee: the right independent consultant will always get the best price from a good company that benefits clients, owners and acquirers alike. 

Think long-term and pay for a value-adding service. Any offer using an independent consultant should always be more than that offered through a broker; after all, the acquirer has more money to spend as they won't be paying the broker.

4. Don't go it alone. Acquirers will always seek the lowest price, but an excellent independent consultant is an experienced and highly successful maker of sophisticated deals. 

Remember, if you pay a consultant, they are acting on your behalf. If you pay nothing, no matter what the broker says, they are not working for you. (Unless they are working for both sides). Remember the adage, ‘if something looks too good to be true, it probably is'.