By Debbie Dry, Group Acquisitions & Integrations Director
Most UK financial advice firms are valued on a multiple of recurring revenue or a multiple of adjusted profit (EBITDA). For smaller firms, published reporting puts recurring-revenue multiples in a realistic range of about 3 to 4x, with profit-based deals for larger firms commonly reported between 6x and 8x EBITDA. The multiple any individual firm achieves depends less on market averages than on a handful of quality factors that buyers price quite consistently, and how much of it is actually banked depends on the deal structure.
I’ve spent more than 25 years on the buying side of this market, including the 57 acquisitions I oversaw at my previous firm, so I’ve valued and negotiated a lot of advice businesses. Here’s how the pricing of an advice firm actually works, and why two firms with the same assets under advice can sell for very different amounts.
The two bases: recurring revenue and EBITDA.
Smaller firms and client-bank acquisitions are usually priced as a multiple of recurring revenue, the annualised ongoing fees the firm collects for ongoing advice and service. Buyers like this basis for smaller businesses because the cost base will largely be replaced by their own, so the revenue line is what they’re really buying.
Larger firms, with management structures, premises and staff that will persist after the sale, are usually priced on EBITDA, profit before interest, tax, depreciation and amortisation, adjusted for one-off costs and for the difference between what the principals pay themselves and what replacing them would cost. That last adjustment matters: a firm showing £600k of profit because two principal-advisers underpay themselves isn’t showing £600k of sustainable profit.
There’s a crossover zone where both methods get used and cross-checked, and the boundary has been drifting downward as buyers get more disciplined about earnings quality. Trade press reporting has suggested buyers increasingly switch to profit-based pricing once earnings reach the low millions. Wherever your firm sits, expect a serious buyer to look at both numbers.
What the market has been paying.
Numbers in this section are snapshots from published market reporting, not promises, and they move with conditions.
For smaller firms priced on recurring revenue, the realistic range is about 3 to 4x. Weaker books sell in the high 2s; well-prepared ones reach 4x and beyond. Published averages move around inside that range with market conditions, softer after the 2021-22 peak, firmer again into 2025, so any single headline figure is a snapshot of other people’s deals, not a price for yours. On the profit basis, reported multiples for established firms have generally run from around 6x EBITDA, reaching 7x to 9x for larger, well-managed businesses with genuine scale.
Two cautions. First, the headline multiple and the realised price are different things: a 3x deal with half the consideration contingent on retention isn’t the same as 3x in cash at completion. Structure is covered separately in how deal structures work. Second, averages conceal more than they reveal. The interesting question is what makes a particular firm trade above or below them.
What pushes the multiple up.
Buyers pay for revenue that will still be there in five years and costs they can predict. In practice that means:
A high share of recurring revenue, evidenced. Not just fees collected, but documented ongoing service behind them: review meetings held, advice delivered, files that show it. Since Consumer Duty, buyers look hard at whether ongoing fees are matched by ongoing value, because they inherit the obligation.
A client bank with a future. Age profile matters. A book where assets will be decumulated or inherited away within a decade is worth less than one with established relationships across generations, including the partners and children of core clients.
Low dependency on the principal. If clients have relationships with a team rather than one individual, revenue survives succession. If everything routes through you, the buyer prices in the risk that it doesn’t.
Clean operations. Consistent fee structures, a coherent investment proposition, one back-office system with reliable data, an orderly complaints history, settled PI cover. Each is small on its own. Together they are the difference between a buyer underwriting your numbers and discounting them.
Team and growth. Advisers under sensible contracts who are likely to stay, capacity to take on more clients, and any record of organic growth all support the top of the range.
What drags it down.
The same factors in reverse: low or poorly evidenced recurring revenue, an elderly book in drawdown, principal dependency, messy or incomplete data. Beyond those, a few specific items reliably cost sellers money.
Legacy advice risk is the big one. Past activity in areas the regulator has scrutinised, defined benefit transfers above all, will be examined closely, and may be handled through price, indemnities, or excluded liabilities rather than a simple discount. A history of complaints, or FCA correspondence that suggests unresolved issues, has the same effect.
Unusual fee arrangements that won’t survive contact with the buyer’s model, revenue concentrated in a handful of clients, and offices or contracts with obligations the buyer doesn’t want all shave value too. None of these is necessarily fatal. They’re all cheaper to fix, or at least to document and explain, before a process starts than to negotiate during one. The practical preparation work is set out in preparing your firm for sale.
Why two identical-looking firms sell for different prices.
Take two firms, each with £150m under advice and £1.5m of revenue. The first has 85% recurring revenue with evidenced ongoing service, a client bank averaging early sixties with adult-children relationships in place, three advisers who each hold client relationships, and ten years of clean data in one system. The second has the same revenue with weaker service evidence, an older book, every significant relationship held by the founder, and data spread across three systems and a filing room.
The first commands the top of the range on clean terms. The second gets a discounted multiple and a structure that hands risk back to the seller, with more deferred and more conditions attached. The revenue line is identical and the outcome isn’t, because the difference was made over the previous decade, not at the negotiating table.
That’s the practical message of valuation: by the time a buyer is in the room, most of the price has already been determined. What remains is evidencing it well, and not giving the determined value back through poor structure. For where valuation sits in the overall process, see the step-by-step guide.
Frequently asked questions.
What multiple of recurring revenue do IFA firms sell for? Published reporting puts smaller firms in a realistic range of about 3 to 4x recurring revenue: weaker books in the high 2s, strong and well-evidenced firms at 4x and beyond, with averages moving inside that range year to year. Firm-specific factors, recurring share, client demographics, principal dependency, data quality, determine where in the range a firm lands, and structure determines how much of the headline is actually banked.
Is AUM a valuation basis? Not really. You’ll see percentage-of-AUM quoted as a rough sense check, but buyers are pricing the revenue and the profit. Two firms with the same assets under advice but different fee structures are simply different businesses to buy.
Does a valuation from a broker mean a buyer will pay it? No. An appraisal is an opinion. A price is what a specific buyer offers for a specific firm under a specific structure. Treat headline appraisals, especially flattering ones produced to win a mandate, as a starting hypothesis.
How can I increase my firm’s value before selling? Increase and evidence recurring revenue, reduce the firm’s dependency on you, clean up data and files, and settle any legacy issues on your own terms. Preparation beats negotiation.
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, and not a valuation of any business. Market figures are drawn from published industry reporting and will change over time.