By Debbie Dry, Group Acquisitions & Integrations Director
Buyers of advice firms examine five things: the quality and evidence of recurring revenue, the client bank and its data, the compliance record, the people and their contracts, and how dependent the business is on its principal. Preparing these areas 12 to 24 months before a sale protects both price and terms, because most price reductions happen in due diligence, not in negotiation.
Having sat on the buying side of due diligence many times, I can tell you the single biggest difference between processes that close cleanly and processes that grind. It isn’t the quality of the firm. It’s the quality of the preparation. Good firms with poor records routinely have worse sales than average firms with excellent records.
Why preparation moves price more than negotiation.
An offer for your firm is a hypothesis: “we believe the business is this, so we’ll pay that.” Due diligence tests the hypothesis. Every place where your records can’t support what was claimed, or where a surprise emerges late, gives the buyer a reason, sometimes a genuine need, to adjust price or harden terms. These adjustments are rarely recovered.
Preparation flips that dynamic. A firm that can evidence what it claimed gets through diligence quickly and keeps the buyers competing, because there’s nothing for the investment committee to catch on. Unprepared, the same firm hands over control of the timetable, and usually a list of price cuts to go with it. The work is identical either way. The only real question is whether you do it calmly now, or under pressure later, once you’re in exclusivity and the leverage has moved to the buyer.
Revenue: not how much, but how provable.
Buyers will want to see recurring revenue by client, reconciled to provider and platform statements, going back roughly three years. They’ll look at the gap between fees charged and service delivered, because under the Consumer Duty they inherit the obligation to deliver it. Annual reviews evidenced in files, advice confirmed in writing, fee agreements signed and current: this is what “quality of earnings” means in an advice firm.
Where revenue is concentrated, in a handful of large clients, or in initial fees that depend on you personally generating new business, expect questions, and prepare honest answers. Concentration isn’t disqualifying. Undisclosed concentration discovered in month four is.
The client bank and its data.
Expect to produce: client numbers and segmentation, assets under advice by client and platform, age profile, fee basis by segment, and movement over three years, joiners, leavers, deaths, drawdown. If your back-office system can produce this in an afternoon, you’re in the top tier of preparedness. If the real answer lives in spreadsheets and the memory of your office manager, that’s the first thing to fix, a year before anyone sees it.
Dormant and unserviced clients deserve particular attention. Clients paying ongoing fees without receiving ongoing service are a regulatory issue as well as a commercial one, and buyers now look for them specifically. Resolve this on your own terms before a process starts: re-engage, re-contract, or stop charging. It’s far cheaper than having a buyer find it.
The compliance record.
A buyer’s compliance team will review a sample of client files, your complaints log, FCA correspondence, professional indemnity cover and claims history, and your training and competence records. They’re looking for two different things: the state of the firm today, and any legacy advice that could generate future liability, with defined benefit transfers the standing example.
You can’t rewrite history, and a sensible buyer doesn’t expect a spotless one. What you can do: know your own record before they do. Some sellers commission an independent file review a year ahead of sale, on the logic that it’s better to find and remediate issues yourself than to have them surface in someone else’s report. Where legacy risk exists, early disclosure with evidence of how it was handled reads completely differently from late discovery. The regulatory side of the transaction itself is covered in the change in control guide.
People and contracts.
Buyers buy revenue, but revenue rests on people. Expect scrutiny of adviser and staff contracts: notice periods, restrictive covenants, whether self-employed advisers’ terms actually secure the client relationships they manage. An adviser who can walk out with clients and no enforceable covenant is a discount waiting to be applied.
The same logic extends to your office lease, your back-office system contract, and any introducer arrangements. Anything the buyer inherits will be read. Tidy, current, signed versions of everything, in one place, is a modest ambition that a surprising number of firms miss.
The principal-dependency question.
Every buyer will ask it, in some form: what happens when you step back? Firms where client relationships are shared across a team, where another adviser already holds the second seat in key meetings, and where the principal’s diary isn’t the firm’s single point of failure, sell better and on better structures, less deferred, fewer conditions, because the buyer’s retention risk is visibly lower.
If you’re two or more years out, this is the highest-value preparation of all: deliberately introduce second relationships across your top 50 clients. It improves the firm whether or not you ever sell. The valuation mechanics of dependency are covered in what is an IFA business worth.
A practical eighteen-month runway.
Months 1 to 6 are about getting the data infrastructure right: one back-office system, revenue reconciled, and client segmentation that comes out of the system rather than someone’s memory. This is also when you commission an independent file review and start acting on what it finds.
Months 6 to 12 are for fixing what that review turned up. You re-engage or stop charging the clients who’ve been paying for a service they don’t receive, refresh fee agreements and client terms that have gone stale, and bring staff and adviser contracts up to date, with the restrictive covenants checked by an employment solicitor. It’s also when you start introducing a second relationship across your key clients, so the firm leans less on you alone.
Months 12 to 18 are for assembling the data room properly, every document above, current and indexed, and taking tax advice on your own position and timing. Only then do you start conversations with buyers, from a position where nothing in due diligence is going to surprise either side.
Firms that follow something like this sequence walk into a sale with their story evidenced. The process is faster, the terms cleaner, and the deferred elements, which depend on a calm transition, start from stability. The full sequence from here onwards is in the step-by-step guide to selling an IFA practice.
Frequently asked questions.
How long before selling should I start preparing my firm? 12 to 24 months gives time to fix what preparation uncovers: data quality, unserviced clients, contract gaps, principal dependency. Some improvements, particularly second client relationships, only move on that timescale.
What documents do buyers ask for when acquiring an IFA firm? Revenue by client reconciled to providers, client bank data and segmentation, fee agreements, complaints log, FCA correspondence, PI policy and claims history, file review results, staff and adviser contracts, leases and key supplier contracts, and statutory company records.
What is a data room? An organised, indexed collection, now usually a secure online folder, of the documents a buyer needs for due diligence. Assembling it before a process starts, rather than during exclusivity, keeps the timetable and the negotiating position in the seller’s hands.
Should I get my own file review before selling? Many sellers do, about a year ahead. Finding and remediating advice-quality issues yourself is cheaper, calmer and reads better than having a buyer’s compliance team find them mid-transaction.
Debbie Dry is Group Acquisitions & Integrations Director at Loyal North. She has spent more than 25 years in UK wealth management M&A and was previously Integration Director at Succession Wealth, where she oversaw 57 acquisitions.
Loyal North partners with established UK financial planning firms whose principals are planning the next chapter. An initial conversation is confidential and without obligation: For IFA principals.
This article is general information, not financial, legal or tax advice.