What Retiring Financial Advisers Need to Know About Selling Their Practice

Is retirement calling to you? Do you long to swap coffee at your desk for margaritas in the sunshine?

Planning and achieving a dream retirement is tricky for everyone, but more so for financial advisers who own their own practice. Luckily, we’ve put together this handy blog post which will summarise the key steps.

How Business Owners Can Secure Their Dream Retirement

As a business owner, your financial future isn’t set up for you automatically like it would be if you were an employee. While you have the advantage of full control over your finances, it also means that planning for the retirement you envision falls entirely on your shoulders.

While this may not have been as prevalent of an issue many years ago, life expectancy is on the rise, meaning many of us could be looking at 30 years or more in retirement. That’s three whole decades without a regular income.

We know your business is your lifeblood, and so many business owners focus so much on growing their company that they neglect to think about saving for their future. This can put them in a less-than-ideal position at retirement stage.

To avoid this happening, there is one main strategy you need to adopt: Plan effectively, now.

A well-structured retirement plan provides financial security, maximises income opportunities, and ensures you make the most of tax breaks available to business owners.

Defining Your Retirement Goals

Nothing great was ever achieved without a plan – and what is the most important part of a good plan? Defining the outcome you want to achieve. 

Ask yourself:

• What kind of lifestyle do I want in retirement?

• At what age do I want to retire?

• How much do I need to save each month to reach that goal?

Having clear answers to these questions puts you on track to securing the future you desire. Plus, the sooner you start, the more flexibility you’ll have—potentially even allowing you to retire early.

Preparing for Retirement as a Financial Adviser

There are lots of options available for funding your retirement:

• Company Contributions: Making pension contributions directly from your company is often more tax-efficient. Unlike personal contributions, company contributions are not limited by your salary.

  
  

• Personal Contributions: If you withdraw money from your business to make personal pension contributions, you may face increased dividend tax rates. The maximum personal contribution that qualifies for tax relief is 100% of your salary, up to an annual limit of £60,000.

  
  

• Basic State Pension: In addition to personal and workplace pensions, you’ll also receive a Basic State Pension. State pension is awarded based on the number of “qualifying years” you have built up, and you build up these years by paying national insurance.

Make sure you check when you’ll be eligible to claim your state pension and factor this into your overall retirement plan. You can find out what you’re entitled to on the Government website at GOV.UK. If there any any gaps in your national insurance contributions, consider making a one off payment to ensure you receive full state v pension.

• Taking a lump sum: If you want to cash in on your biggest asset. you can sell your practice and receive a lump sum to help you achieve your desired retirement.

Selling your Practice

If you decide to go down the “taking a lump sum” route, here’s what you need to know.

Selling a financial advice business isn’t a quick process—it requires careful planning, the right expertise, and a solid strategy.

First off, you need a comprehensive exit plan. You may be sick of hearing the word “exit plan”, however, it is of the utmost importance. Why? Well, if you’re selling your financial advice firm, potential buyers will be much less likely to give you the offer you want without one. The lack of an exit plan is a huge red flag for any prospecting buyers, as it signals that the company could be rocked by instability upon you leaving.

Once this is in place, take some time to educate yourself on the process of selling. Understanding the sales process, tax implications, and due diligence requirements will help you be better prepared. Stay informed by attending industry webinars, subscribing to newsletters, or seeking expert consultations.

Selling an advice business isn’t a quick sale. It can take 2 years or more. To make sure everything goes smoothly, assess your business’s value, optimise financial records, and ensure your data is well-documented to ease the due diligence process. Be ready for extensive financial and legal scrutiny.

Next, you need to appoint a team to help you. Surround yourself with experts, including an accountant for tax efficiency, and a solicitor to handle legal complexities.

Once you’ve had the offers in and selected on, it’s time to sign a purchase agreement. From there, assets are transferred, payments are received and the exit plan comes into play.

Looking to sell your IFA?

If you own an Independent Financial Advisory (IFA) business and are considering selling to secure your retirement income, Reeves Financial Services is here to help. We will work with you across every step of the process to ensure the best outcome for you, your clients, and your staff.

If you’re interested in learning more, book a call here.