The number of advisers looking to sell their ifa business will increase rapidly over the 2010 and 2013 as the RDR is implemented and the ramifications become clear. Rather than putting up their IFA for sale, owners are often propositioned with a commission split arrangement involving another independent financial adviser servicing their clients and the ifa for sale receiving an annuity type arrangement rather than being paid upfront.

Whilst this type of arrangement often seems highly lucrative on the surface it is an incredibly high risk strategy.

Selling an IFA business to someone the selling ifa already knows or even one of the many commission split options available on the market can be highly volatile in terms of the new RDR guidelines for IFAs and it is also not particularly lucrative.

One of the reasons for this is that the latest RDR guidelines stipulate that although trail commission can still be claimed (as long as the selling ifa has been sold before 2013), once the client is reviewed the trail income must in the vast majority of scenarios be moved to an IFA client paid fee agreement.

This has thrown a major spanner in the works of a lot of commission split options as leaving the trail commission un-disturbed is very difficult if IFA clients are to be serviced properly and their finances reviewed by the acquiring firms advisers.

Many IFAs for sale are realising that the move to a client paid fee arrangement is likely to be a complicated sale and this is compounded by the fact that it is a new adviser (the acquirer) making the sale rather than the selling IFA who would have had a far higher conversion ratio due to the many years of goodwill built up.

If seeing the clients means an uncertain sale being conducted by a new adviser risking your payments then the only alternative in this type of arrangement would be to leave the client (and hence the trail) undisturbed.

Selling IFAs considering this type of exit strategy should consider that, given an average 10% IFA client drop off rate and a 70% split on trail the selling IFA will only about 2.5 times multiple of recurring income in the first 5 years.  10% is tiny given that the clients will not be receiving a service and the real amount would likely be much higher.

The attrition rate could be huge if the media pick up on trail commission and some of the new businesses recently launched trying to motivate people to cancel and re-direct their trail commission payments. Trailbuyer is the answer offering IFAs an up-front, totally free, automated valuation followed by completion and your money paid in just 21 days.

Simple, quick and safe… www.trailbuyer.com