This article is intended for regulated financial advisers and investment professionals only. Wealthtime does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.

It can be tricky for advice professionals to gauge what they should be doing when it comes to building and protecting the value of their firm. Understanding your firm’s value and how to maintain and grow it can feel like a daunting task on top of everything else on your to-do list.  

Figures from financial consultancy the lang cat’s latest State of the Advice Nation (SOTAN) report indicate that 68% of surveyed business owners expect turnover to grow this year, up from 42% last year. Clearly there is a feeling that the outlook is positive, but how can firms ensure that increasing turnover translates into better business value? We spoke to Roderic Rennison, Partner at M&A consultants Catalyst Partners, about the factors that drive business value and how advisers can protect and grow the value within their firms. 

Having a plan 

Rennison believes that every firm should have a succession strategy. He says, “It should be a written plan that is regularly updated. It is all very well having it washing around in your mind, but there needs to be something that you’ve thought through and committed to paper.”  

Even for firms not planning to sell, it can be helpful to visualise and quantify your business’s stage of development to better understand where value lies and how you can build and maintain it. Once you have a clear view of your short- and long-term goals, you can begin to focus on which areas influence the value of your firm, both positively and negatively.  

What drives value? 

Assembling comprehensive management information is vital for gaining a deep understanding of your business. This includes knowing the age distribution of your client base, average case size and the proportion of overall assets concentrated in your top clients as well as understanding the financial impact of what you charge clients for your services.  

Rennison indicates that analysing your client base in detail will help you identify if there is any scope for adjustment by diversifying your client base or expanding your proposition. “If you’ve got a lot of older clients, for example, a heavy concentration over 75, then that is going to make a difference to the valuation. Or if you have a number of clients with smaller portfolios, you have to ask yourself, are they valuable? Should I keep them? There are various pluses and minuses to consider” 

Mapping the strengths and weaknesses of your firm gives a clearer sense of what adds value. According to Rennison, aligned business cultures, a clearly defined client service proposition, and an average client size of £250,000 to £500,000 are all attractive attributes.  

What undermines value? 

Of course, it’s not just about what adds value, you also need to be aware of the factors that can reduce it. “Undoubtedly, undocumented or incomplete annual suitability reviews have been a big, big area of focus,” Rennison warns. 

A weak compliance culture or historic regulatory issues can have a significant negative impact on business value, so adequate record-keeping is critical. Other areas that may decrease value include a high number of DB transfers or a heavy concentration of insured investment bonds, although these risks can often be mitigated with strong professional indemnity cover. 

For firms looking to attract a buyer, Rennison highlights something many overlook:  social media. “Inappropriate comments on social media do not go down well if you are seeking to sell your business. It might sound obvious, but it is important to think about how your image comes across to potential acquirers.” 

It’s clear that value isn’t just about assets or growth – it’s also shaped by perception, compliance, and how well your firm is run day to day. Ultimately, whether you’re planning to sell or simply looking to create a stronger, more resilient business, a robust strategy, strong governance, and a clear client proposition will help you build a more valuable advice firm.