Selling your IFA business- practical steps

According to the plimsoll analysis of the IFA sector I received today, "Times have never been better in the IFA sector with many companies making exceptional profits"

While that is no doubt true, there is a definite growing IFA underclass, unable to keep up or even fully understand the regulator, principle based regulation, where the RDR is going to take them. They know they will have to get out of the business sooner rather than later- so they need to think about how to get the best value for what they have.

What practical steps can owners of small IFA firms take to improve the value of their business?

1. Data

If you want to sell your business for the highest value, your new owner needs to know where the client information is, that it is complete, full and in a system that he can integrate into his own. So check this, now.

You don't need a fancy database- and if you do buy one, check that it can export to Excel type arrangements so that your acquirer doesn't have to go to lengths to integrate it.

You don't have to have the full fact find details in there either, just basic contacts details, phone numbers, e-mail addresses. You can use the insurance company uni-pass system to get the latest data from providers. Tell your acquirer you have audited your data against the insurance company records. It is worth money to you.

2. Clean Compliance

One of the things that I see regularly when carrying out due diligence on small firms is that you think that things have been done, but there is no evidence or audit trails. Look at your compliance records, especially areas where you know that an acquiror will focus, because the regulator has said they are looking at- and build an audit trail- evidence that you have ticked this box.

TCF- record a minute of your staff meetings and put this on the agenda- every time, draw up a checklist of the things you have considered: change your Terms of Business to incorporate

Anti-Money Laundering- have you got a record, is it considered every year, refreshers etc

3. Funds under Advice/ Management

Smart acquirers are looking to build funds- that's where the big multiples are for them. So get into the mind set of how your acquirer exits. He wants to value his whole book on the total funds. The more you give him what he wants, the more value you can achieve.

So this goes back to data- show your clients assets, not just the ones you control, but the ones on the fact find that you don't. Show the client's cash deposits too.

If you show what you have, how much trail income you have built, but also how much more could come from your client bank, you make it easy to get the best value.

I'll talk about other aspects of getting best value soon.