How do I know if I should sell my financial advisory business?
Financial advisors aren’t simply selling to retire anymore. Recently, we have been hearing a variety of reasons for business owners wanting to sell their financial advisory firm or client bank – or at least keeping all options open.
From our own personal experience, and since reviewing the data collated from our customers, here are our top five reasons financial practices are considering a sale in 2019…
Over the past few years there has been a huge amount of change in the sector. We often adapt to one adjustment in compliance, and then along comes another. As a result, the modern advisory world looks and feels completely different to the one that existed a decade ago.
While there is an appreciation that the industry has made marked improvements, there is a burden of compliance that can have a larger effect on smaller, directly authorised firms, and as a result detracts from servicing clients. Many advisers want to return to a more client-facing role, knowing this is being taken care of by the acquiring firm.
Some modern firms are striding ahead with fantastic, innovative processes and solutions for clients. The use of cutting-edge-FinTech for research and delivery to customers, is easily adopted as a company grows in size.
Some organisations are considering whether to invest in their own businesses resources, or join forces with a firm already offering what they want to achieve, in the pursuit to deliver the most valuable outcomes for clients.
3. PI insurance
With a shrinking number of providers offering PI insurance to financial advisers – especially those willing to insure against high risk business – the cost for many firms has sky-rocketed recently, and there is a concern this trajectory will continue. Excesses are also increasing, and restrictions or exclusions being added. The worry is that insurance may be difficult to obtain in the future or may be deemed worthless.
The age of the average adviser is now well into their 50’s, and as a result, retirement might not be a too-distant goal – especially if they have followed their own advice! With a range of succession planning options available – one of which is selling the business – many potential sellers are open to conversations, in case they find the right fit for them.
There is also the appreciation that an effective hand-over can take a number of years, so where retirement is a potential in the next five years, client or business owners are considering their options early to take advantage of a long and thorough courtship with potential acquirers.
As an owner of an advice firm, you are well-aware of the ongoing liabilities and impact that potential future claims could have on you and your business. Whether your concerns are founded or unfounded, this is a highly regulated industry under constant – and often rightful – scrutiny. With worries about future thematic reviews, or the potential for barratry, many owners want to understand whether selling their firm can reduce some – or all of – their ongoing liabilities.
We hope this has helped you to understand some of the reasons why a business owner might want to sell their firm. If you’d like any more information on this, please feel free to get in touch with us here.