Entering and exiting the advice profession with confidence

There has never been a more challenging time to sell a business and exit the advice profession. While previous years witnessed a spike in activity due to consolidation activity and increased appetite among buyers and sellers, there has been a drop off in sales recently. Increasing interest rates and the cost-of-living crisis have led to an environment where buyers and sellers must tread carefully. Equally, whilst Consumer Duty has been driving more advisers towards exploring an exit, it has also led to large consolidators ‘pausing for breath’ as they review their business models. Recent figures suggest the number of advice deals reduced from 132 to 2022 to 107 in 2023 (Ernst & Young).

Whilst private equity continues its march into the advice sector, concerns remain over how clients are being impacted. Indeed, PE-backed models are typically known for purchasing underperforming companies, stripping out inefficiencies, and selling at a profit. With ongoing regulatory changes, evolving client preferences, and an uncertain macro environment, business owners are facing into a challenging market where exit options may appear hazy.

However, this is a good time to take stock. Because people often don’t plan to fail, they fail to plan. And there has never been a more opportune time for advisers to rethink their exit strategies and make their succession plans as robust as possible. Whilst the future is uncertain for many, there are still ways to exit the profession with confidence.

Finding ways in and out of the advice profession

At St. James’s Place, we offer a proven model for advice professionals to exit and achieve great outcomes for clients. Through our Business Sale and Purchase (BSP) model, we have created over £1.8bn of capital value for advisers and completed over 4,000 full and partial sales, including over 280 sales in 2023.

Over the past 30 years, our BSP model has offered new advisers a way into financial advice and established advisers a way out. In doing so, we help buyers and sellers to find each other, facilitate the transaction, and support all aspects of the legal and regulatory process. For sellers, we help to maximise profitability before a sale, value their client book, find the right buyer, and plan their exit, whether it’s in a single transaction or phased over time. For buyers, we provide a scalable funding model at highly competitive terms (3.5% above base), complete affordability calculations and support the completion of due diligence on client servicing, which is particularly important following the new Consumer Duty rules.

Advisers benefit from a range of support services including 1:1 consultancy, management buy in/buy out consultancy, guidance on business structures, regulatory compliance, succession plan strategy, online toolkits, and local workshops to guide them through the process.

Recent innovations

In a challenging market where there are more sellers than buyers, innovation in exit models takes on greater importance. That’s why, as a business, we’re not standing still. Instead, we’re developing our BSP and finding new ways to support buyers and sellers in what can be a highly complex transaction.

One of these innovations is our new ‘RightMatch’ tool. Taking inspiration from the property market, ‘RightMatch’ efficiently matches buyers and sellers across our community of over 4,800 advisers. Using various data points, business owners can have confidence in knowing the individual buying their business is both a strategic and cultural match for their clients.

For those looking to buy or sell over the long-term, we’re also seeing an increase in partial sales of advice businesses. Whilst a full sale facilitates the entire business in one transaction, a partial sale means business owners can gradually exit over time. We see great examples of sellers working with buyers to execute the handover of trusted client relationships, supported by Salesforce, the world’s leading CRM system, to ensure full servicing records are in place.

Finally, we recognise cashflow and affordability can be challenging for new business owners, and this can prevent them from purchasing an existing client book. As such, we have introduced new lending terms with a ‘soft start’ repayment profile, where capital repayments are reduced in years 1 to 3 for all ‘first time buyers’, helping advisers to retain more of the income they generate and accelerate business growth in the crucial early years.

Fit for the future

In times of uncertainty, relying on proven strategies offers a dependable path forward. These strategies, honed through years of practical application and refinement, provide a trusted framework that reduces risk and ensures stability.

BSP is more than just an ‘exit strategy’. It’s a holistic proposition, encompassing skilled professionals, streamlined processes, and innovative technology to support new and established advisers in buying and selling clients.

For sellers, BSP provides experienced advisers with a proven model to build and realise capital value. For buyers, BSP represents an opportunity to secure crucial funding in a highly supported business environment and acquire new client relationships to achieve business growth. Most importantly, clients receive continuity of service from a handpicked advice professional who has benefited from an effective handover and is ready to deliver the great levels of service they have become accustomed to from.

In a Consumer Duty world, not all models will stand the test of time. Buyers and sellers will experience more risks when buying or selling an advice business. Buyers may not always be aware of the liabilities being purchased. Sellers may find it challenging to secure appropriate ‘run-off’ cover and be forced to exit in a cloud of uncertainty. With the SJP Advice Guarantee, no liability is embedded within the client book, giving buyers and sellers peace of mind, meanwhile our 95% client retention rate also provides predictability of future revenues.

With an expansion from simple debt provision into equity offerings, including helping to facilitate management buy-in transactions and providing deferred repayment options, our BSP is continually evolving and remains fit for the future in a highly dynamic market. All of which gives advisers the opportunity to enter and exit our profession with confidence.

For more information about our BSP and the opportunity to join us, please get in touch.