Selling an advice business is one of the biggest decisions an adviser will ever make.
For most principals, it’s not just about the price – it’s about ensuring that your clients and staff are well looked after once you’ve stepped aside.
That’s why many advisers turn to exit consultants. But not all consultants are equal.
Some act mainly for buyers and are focused only on introductions and closing transactions. Others go further, offering strategic support to strengthen your proposition and prepare your business for a future sale.
To work out which type of consultant you’re dealing with, you need to ask the right questions. So, what are they?
How do you assess and improve the value of a firm?
The type of consultant you want to work with is one that takes the time to understand your business in detail, will benchmark against peers and identify areas where improvements can be made.
That might include tightening your fee structure, cleaning up your client bank or improving compliance processes and data handling.
What you want to see is a clear plan for enhancing value before you begin the sale process.
Be cautious if a consultant immediately talks about finding a buyer without first exploring how to maximise what your firm is worth, otherwise you probably won’t walk away with the best deal.
What’s your view on technology and data?
Your client data and systems are central to how buyers assess your business. Poor record-keeping, fragmented systems or gaps in compliance files can be deal breakers.
A good consultant will take the time to review your systems and processes, and help you bolster any weaknesses. They should also advise on whether technology upgrades could increase efficiency and boost your firm’s appeal to buyers.
If they fail to mention data and systems at all, it suggests they may not understand the factors that most influence valuation.
How do you evaluate the strength of the client bank?
For many buyers, the client bank is the single most valuable asset in an advice firm. But its quality matters as much as its size.
The consultant you choose should be able to analyse the recurring versus transactional income mix, client age profiles, retention rates and cross-sell opportunities.
They should understand the importance of protection penetration, client segmentation and the sustainability of long-term revenues.
If they cannot demonstrate a rigorous approach to assessing client bank quality, they may not be equipped to negotiate the best deal on your behalf.
How do you match sellers with buyers?
Getting a good price is important, but it’s not the only consideration. In fact, many sellers – and buyers – want to ensure a good cultural fit and that the two firms will be able to successfully integrate post-sale.
For that reason, you need the right buyer – not just the one willing to write the biggest cheque.
With that in mind, it’s important to ask your consultant how they source and vet potential buyers. Do they look beyond financials to consider cultural compatibility? Do they help with planning for continuity of service and staff retention?
A consultant who focuses only on the numbers may expose your business to higher risks during transition. The right buyer is one who shares your values and can offer continuity, as well as fair value.
What support do you offer post-sale?
Signing contracts is not the end of your relationship with your consultant – or at least it shouldn’t be.
The months after the sale are critical for ensuring a smooth transition. Your consultant should provide support with client and staff communications, regulatory handovers and integration with the buyer. Without this, you could be left exposed at the most sensitive time.
The way a consultant answers these questions will reveal whether they are focused purely on transactions or if their interests are truly aligned with yours.
Exiting well is about more than getting the highest price for your firm – it is about protecting everything you have built.
Claire Cherrington is director of PMS and Bankhall
