How to value your IFA business скачать в хорошем качестве

How to value your IFA business

Before you can think about retirement, you first need to get a good understanding of how the acquisitions process works. A good first step is to understand how to value your own IFA business and how Acquirers are likely to assess what your business is worth to them. Contact us: https://bit.ly/3ebq200 Website: https://www.ifa-acquisitions.co.uk/ LinkedIn:   / ifaacquisitions   Email: enquiries@ifa-acquisitions.co.uk Telephone: 0208 0044 162 Timestamps: 0:00 Intro 0:16 Context 0:58 Importance 3:05 Ways to value 3:32 Recurring Income 4:24 EBITDA 6:13 Percentage of AuA 7:17 Impacting Factors 12:15 Our advice 14:05 Conclusion Blog equivalent: How to value an IFA business: https://www.ifa-acquisitions.co.uk/ho... No two IFA businesses will be exactly the same. Therefore, multiples of profit or recurring income will vary depending on several factors. In this blog, we will aim to inform you on how to navigate through the myriad of factors that affect the valuation so that you can define a fair price for your IFA business. The importance of valuing an IFA business Firstly, why is correctly valuing an IFA business so important? Well, getting the valuation of your IFA right is so important for several different reasons… Planning for your retirement – It will be near impossible without knowing a rough estimate of the funds you will have available to you. Without knowing if this is going to provide you with a fair value, who knows how often you’ll be down the golf course! Knowing timings – Following on from the last point, many will structure their exit timeline around the number they receive. For example, a firm may not be ready to sell now but in two years they will have grown to a point where it is now suitable and sustainable for them to hand over to an acquirer. You open yourselves up to the right people – A key part of any exit is finding a fair and just buyer with who you will be able to grow a strong working relationship and they have a client centric proposition to maximise retention, knowing they will provide a valuation that is likely to be close to what you end up being paid. Different ways of valuing an IFA business IFA magazine recently detailed in an interview that the two main ways of determining a business worth are through a multiple of recurring income or a profit-based multiple (EBITDA). These are also the most common methods we see here at IFA Acquisitions, let’s have a quick refresh on these methods… Recurring Income = The amount of recurring or ongoing income your business generates per annum. Typically, anything between 3 to 4 times this number is an industry-standard in what you can expect as a capital event when handing over. However, in the current industry climate with the larger consolidators, we’ve been seeing some multiples of 4x – 5x! The additional premium above 4x can often be attributed to giving extra towards the additional corporation tax that will be payable on asset purchases. EBITDA = Earnings before interest, taxes, depreciation, and amortization. Essentially EBITDA is an adjusted profit metric. The average offering by those acquiring firms using EBITDA is a bit vaguer and it is worth noting each acquiring business will be different depending on their circumstance and size. Although EBITDA does have its critics, it is still one of the industry standards. It is mainly used by any business that wants to take on a going concern with advisers and support staff that will remain in the business post sale. An EBITDA calculation helps make sense of what profit the acquirer is buying when the acquirer is taking on cost. Often multiples of up to 6 times is seen for SME;s and can extend to 8 to 9 times for larger businesses with £500m FuM or more. Here at IFA Acquisitions, we have carefully cultivated a number of nationwide acquirers with various preferences on acquisition types. Furthermore, the FT advisor released a blog in which Scott Gallacher, Chartered Financial Planner at Rowley Turton gave another explanation, he said “IFA businesses tend to be valued [based] on one of three ways. [These include] a multiple of ongoing advice charges, a multiple of profit or as a percentage of Assets Under Advice.” To break down Scotts examples. Multiple of ongoing advice charges – This is the same as recurring income and is the industry standard for most deals. Multiple of profit – This is the same as EBITDA and is usually used by larger businesses Percentage of Assets Under Advice (AuA) – This is an uncommon method usually used by larger Wealth Management businesses who have their own DFM and will be reaping the lion share of the TER, rather than just from advice fees. Continued on the blog equivalent...