Print this article
M&A Market For UK Financial Advisors Shifts; Vendors Now Outweigh Buyers - Consultants
Tom Burroughes
14 October 2013
In the wake of the UK regulatory
shakeup of the independent financial advisory sector, there are more vendors of
IFAs than acquirers, shifting dramatically from the balance three years ago,
according to , an
organisation advising people on such deals. Back in autumn 2010, the ratio
of buyers to sellers was nearly 20 to 1, the firm said; by the end of 2011,
that ratio had dropped to around 3 to 2, reaching around parity at the start of
this year and is now moving towards there being more sellers than buyers. “It will come as no surprise
that the RDR is the common factor – but the motivations of sellers couldn’t be
more polarised. For some, it feels like the hard work has been done. Now is the
time to look to the future, and to focus on long-term prospects and exit or
retirement plans. For others, working life is still too much of a slog. Many
vendors don’t like the direction of the industry, so they’re planning to sell
up and leave,” Brian Spence, managing partner of the firm, said of his business’s
research. Spence has been a strong critic
of some recent changes to the industry, fearing that regulations on IFAs will create
a class of “orphan” clients no longer able to afford financial advice. The
issue has become sufficiently serious that the Financial Conduct Authority, the
UK
regulator, has started to examine the issue. In the run-up to the RDR and in
its aftermath, a number of IFAs have sold up, with aggregator firms such as
Syndicate Asset Management, Focus Financial and Succession snapping up
businesses to tap what they see as a new business landscape. Commenting on the state of the
IFA market, Spence says his firm typically secures sales at a minimum of three
times recurring annual revenue, with some buyers offering additional
incentives, including up to 25 per cent of income in the first two years
following a sale. Harrison Spence Partnership’s experience is that those
practices with £50,000 to £100,000 in fund-based renewals are currently particularly
attractive to acquirers, he said. However, prices may be
peaking and small practice owners should explore their options for selling,
rather than risk prices taking downwards trajectory. The market is dominated by
a few large acquirers and if they change direction, or the regulator makes
acquisitions too difficult, the price of IFA practices will plummet, he said. “Those considering
selling in the next five years should at the very least explore their options
to ensure that they secure the best price for their business,” Spence adds.