By Tim Clark, Succession Director
Having spent 40 years in the Financial Advisory sector, I can tell you that the current landscape is changing – fast. Right now, there are around 27,000 Independent Financial Advisers (IFAs) in the UK. Of that cohort, a staggering 15,000 of them have retired or are currently seeking an exit within the current decade.
This isn’t just a trend, it’s a seismic demographic shift that’s already well underway. A number of business owners have already sold with price as their primary driver, typically to more aggressive consolidators. However, we are also now seeing a wave of owners where client outcomes – maintaining their firm’s quality of service and looking after their clients, Advisers, and staff moving forward – are key priorities in addition to price.
We are also seeing a smaller group of younger Advisers emerging, keen to take over an established and well-run business to become the next generation of Directors and business owners themselves. They often already work within the firm itself, and are sometimes the sons or daughters of the current owners – but typically require some form of financial backing.
The Problem of Consolidation
This gap between the number of IFA firm owners looking to retire and the number of IFAs able to buy their businesses has opened the door wide open for private equity firms, who are swooping in, taking advantage of the problem facing these UK Advisory businesses, and buying them up at an alarming rate. These private equity backed businesses often make the IFA firm’s clients adopt financial solutions that are a far cry from what they’re accustomed to – perhaps in the private equity firm’s best interests, but not always in the client’s.
It’s no wonder that the Financial Conduct Authority has recently taken a keen interest in the consolidation taking place within the financial advisory sector, investigating the rising tide of mergers and acquisitions that have taken place over the last few years.
Whilst there are some IFA firm owners who are perfectly happy to cash out and sell their firm to one of these larger, more aggressive consolidators, the firms’ new owners often go on to sell the business again within a few years, aiming for a return on investment that often neglects the values and relationships that the original owner built over decades. It’s a relentless cycle that leaves clients feeling like commodities. Frankly, it’s not the legacy that the better Advisers and business owners want to leave behind.
The people we speak with don’t want to see their businesses – their staff and clients, many of whom are personal friends – handed over to such an invasive model. That’s where ValidPath steps in.
We offer a compelling alternative to consolidation – our Succession Solution.
How Succession Works
ValidPath’s Succession Solution enables IFA owners to retire on their terms while ensuring that their clients continue to receive the same level of service they had before, from the same team, utilising the same financial solutions that they are used-to. Here’s how it works:
Sell Your Business
If you’re ready to retire, we’ll handle the sale of your IFA firm from start to finish. You’ll typically receive between 50-60% of the sale value on completion, with the balance paid in two subsequent tranches at 12-18 months and 24-36 months, depending on your retirement plans.
Transfer Ownership
Once the completion and subsequent payments have been made to the retiring shareholders, we typically allocate up to 20% of the business shares to their chosen successor – someone who will become both a Director and Adviser in their own right and take over the running of the company for the future. Often this can be more than one individual, depending on the size and structure of the firm, and occasionally we see operational staff stepping up into such roles.
Smooth Transition
We take care of everything, from valuing your business to transferring the operational and regulatory responsibilities to the new owner. This ensures the business runs smoothly during the transition, with minimal disruption to staff and clients.
Support for the New Owner
The new owner (often someone already in the business) will get full support from us covering everything from regulatory help to financing, so they can focus on growing the business and looking after clients.
Often, IFA firms become ValidPath Members in advance of any transaction to get help from our expert, technology-led compliance and support teams, ensuring all of the most recent compliance and operational requirements are up to date before passing on the business to the next generation. This proactive support allows you to get all your ducks in a row, providing peace of mind as you hand over the reins to your chosen successors.
Learn more about what you need to know as a newly qualified financial adviser.
Leaving Your Legacy
We believe we are unique in offering this succession service. Many IFA firm owners choose this path because, at the end of the day, they see it as the right thing to do for the people they care about most.
We are also very flexible in our approach to any retiring business owner, giving them total freedom to choose their own time frame for handing over their clients and exiting the business. Freed up from running the business, they often experience a swan song and spend an enjoyable couple of years just looking after their key clients and helping the next generation of Directors and Advisers to take the business forward. Very often the deal can be structured in such a way that these retiring owners can also benefit from any ensuing growth, as part of our flexible approach to each transaction.
This solution is not just about your future. It’s about contributing to a financially safer world by ensuring that the UK IFA sector is nurtured rather than consolidated and sold off. With our Succession Solution, you can rest assured that your clients will continue to receive the same high-quality service they’ve come to expect over the years.
It’s a rewarding path, helping seasoned advisers retire peacefully while paving the way for new talent to thrive. At ValidPath, we want to help you build a future rooted in integrity, care, and the enduring relationships that define great financial advice.
Interested in ValidPath’s Succession Solution?
Learn more about our Succession Solution here
