Increase the Value of your Financial Advice Business

I’m often asked how an adviser can increase the value of their business beyond the discounted value of your future income stream. This is particularly relevant for advisers who are looking to exit, and want to achieve the greatest sale price possible for their business.

It’s an area that I’ve written about before, but you might want to consider in a bit more detail a few of the factors that could drive up that sale price in your favour.


The Shape of your Revenue Model

One of the key factors in driving up the value of a business is the shape of revenue in the business. Is the business mainly living off high upfront commission payments with smaller future payments due, or has the business moved to flatter commissions on protection business and trail commission / fees as opposed to upfront commission on investment and pensions business?

Obviously the latter will be far more attractive to a potential purchaser. There are many advisers actively making this shift or looking to make the shift at the moment, either on their own or with the guidance of some of the product providers.

The size of this future income stream is important, but equally so is the persistency of it. A buyer will look to see your firm’s ability to both build up and then retain clients, to ensure that this income stream will continue into the future to their benefit.


Your Brand Value

Is there equity (value) in your brand? Having a brand that is well known, respected, considered better than a competitor’s brand is strategically really important. It is also famous for being very difficult to measure! But there are ways that you can influence this really important factor, to help you achieve a better sale price for your business.

How well known is your brand? How much time and effort to you put into building the awareness and credibility of your brand among your target audience? Is your brand positioned where you want it to be, and equally importantly where a potential purchaser will see as attractive?

Does your brand then actually deliver? Can you prove this through any quantitative measures (brand awareness measures, customer satisfaction results) or through qualitative feedback such as testimonials from clients about their experiences of working with your business?

Being able to demonstrate this brand equity could very positively impact the value of your business at sale time.


Your Sales & Advice Proposition

Has your business been built successfully (but solely) around your great relationship building and client acquisition skills? While this has undoubtedly been really valuable for you, what value does it hold for a potential buyer if you are planning on walking off into the sunset?

Alternatively, some advisers have built on these skills, for the benefit of other members of their sales team by developing processes and supports to acquire and deliver advice to clients. These processes and supports ensure that if you are out of the equation, your business should continue to develop sales and deliver excellent advice-based solutions to clients. Now that is really valuable to a buyer!


Clear & Valuable Target Markets

A buyer of your business will place a lot of value on your business offering “something different” to them. This might be particular expertise, skills or indeed access to a corner of the market that they have failed to access themselves.

Can you offer a potential purchaser access to a new segment of the market? This might be based on a product offering (for example the corporate pensions market), a geographical area where they currently don’t have a presence or a sector of the economy (a particular business sector or group of professionals). For this to be credible, you need to be able to demonstrate a genuine focus on the area, a differentiated approach that you utilise with this segment and demonstrable results in successfully gaining traction in the target segment.

After all, if your target market is “anyone”, what are you then actually bringing to a potential purchaser in terms of new opportunities?


Operational Excellence

A worry for someone buying a business is the skeletons in the closet. Are they suddenly going to be faced with a load of legacy problems – poor advice that will come home to roost, poor documentation that could leave them exposed, lots of clients who are completely disengaged from your business and who really have little loyalty towards it.

These factors will seriously undermine your price. Indeed they will often completely undermine the sale of your business at all, as a buyer just won’t want to take on these challenges. That is except possibly at a real knockdown price.

The challenge for you is to deal with these issues now and address them so that you are handing over as healthy a business as possible. And getting the best price as a result!


These are some of the factors to consider when looking to “fatten up” your business for sale. For any of you looking to buy or sell, do these match your experiences and what other factors do you consider? All comments as ever are welcome!

Will Clients Pay Annual Fees?

The whole area of fees sends a chill down the spine of lots of financial advisers. How much do you charge? Will clients pay? Will they pay every year? These are some of the questions I’m asked all the time.

Yes we’ve seen moves towards fees in other markets, with a lot of focus on the changes in the UK in particular. But that doesn’t mean that we’re moving to a fee only environment in Ireland. In any event, I think the question of commission v fee is the wrong question… To my mind, it’s all about what you’re being paid for, rather than how you are paid.

Maybe let’s start with some of the reasons that clients won’t pay annual fees, whether this is paid by an annual fee, a monthly retainer or as a trail commission.


They can’t afford them

There’s no doubt, there are many clients out there who just are not in the position to write you an additional cheque every year. Their income may be low, their outgoings may be high and these clients are seeking the minimum number of financial products to meet lender requirements and to provide basic levels of protection for their families. These clients are not going to pay fees.


They don’t see why they should

This is a more interesting group… These people can afford fees, have multiple financial advice and product needs but don’t see why they should pay for it each year. Whose fault is this? Well it’s theirs if they think that they can get your services for nothing. But maybe it’s your fault if they just don’t place enough value on what you do? You need to consider;

  • How much value are you providing beyond setting up products?
  • How robust and valuable is your planning and advice model?
  • How well do you communicate this to clients?
  • How well do you link this value proposition with your charging basis?

Get these right and you’ve a better chance of convincing this group to pay your fee each year.


They know another adviser who won’t charge a fee

There is always another adviser who will undercut you on price, indeed there are execution-only options out there for clients. However this is where the focus is solely on the product implementation. If you can demonstrate to the client that the fee is for the excellent and valuable advice that you give and that this will positively impact their outcomes, they are more likely to decide based on value gained rather than the price paid.

This group is a tricky one for advisers who hate to see a client go elsewhere. But if you’re not being paid a fair price for the value that you bring, it sometimes makes sense to walk away…


So what are the main activities that you need to undertake in order to give yourself the best chance of convincing your clients that the annual fee is worth paying?


Develop a compelling advice proposition that clients value

I know that there is a huge amount of talk at the moment about the need for a clear value proposition… But it really is a basic requirement if you hope to convince people to base their purchase decision on value rather than price.

Your value proposition needs to demonstrate to clients and potential clients, what you do, where you add value, why this is important to them and the positive impact that you will have on helping them achieve their financial objectives and better outcomes. Think this through from the client’s perspective – if they can’t connect with the value for them, you’re going to find it more difficult to justify your fee.


Make sure clients value your advice, not the product purchase

Move the conversation away from choosing the right product and then implementing it. At the end of the day, the clients don’t place much store on this. Advisers who are today receiving large portions of their income from fees focus more on helping the client really understand their life and financial objectives and then develop a plan for the clients to help them achieve these objectives. The products merely become vehicles to help them get there.


Deliver a great service and review process

If you’re going to look to charge your clients each year, you’re going to need an ongoing service that clients believe is second to none and worth the price paid. This will mean being available, adding value throughout the year and communicating regularly with clients.

Central to this is developing a really powerful review meeting. This is not just about communicating updated values (even though you do this too), but it is about really demonstrating to the client how they are progressing towards their financial objectives, and why continuing on this journey with you offers them the best opportunity of achieving their desired outcomes. So broaden this meeting out, bring in all of your undoubted experience and expertise and package it, so that your clients will seek out these value meetings with you, year after year! And it makes it easier for you to justify your fee.


What experiences have you of charging fees? What are the main hurdles that you encounter? Please feel free to leave your comments below