Advisors of any kind, be they IFAs, Insurance Brokers, Accountants or Solicitors (and more besides) often talk about “books of business” or “client banks” being bought and sold. For some, it sounds like you are buying a ready-made set of clients and guaranteed income. In reality, the position is more complicated, and there are several misconceptions about what is actually being transferred. This article explains how it works in practice, what is really being sold, and what both buyers and sellers need to think about.
In this article, I address some of the myths and preconceptions about buying (or selling) a financial services business as a ‘book of business’.
What is meant by a book of business
When an adviser says they are buying or selling a book of business, what is really being transferred is the goodwill of the firm, the client records, the business data and the right to receive ongoing advice fees. It does not mean that clients themselves are being bought. Clients are always free to choose who they want to instruct for financial advice.
The “book” is therefore a commercial shorthand. It describes the relationships, contracts and systems which have value because they usually generate repeat income. What is being sold is a collection of information and rights that allow the buyer to service those clients and hopefully maintain the revenue stream. I suspect the phrase originates from the time when your client contacts might have been kept in an actual book, who knows.
Who the client contracts with
Unless you are directly regulated by the FCA, it is unlikely that your clients contract directly with you. If you’re an AR (appointed representative) through a network firm, such as St James Place, True Potential, Teninsurance, James Hallam, then the client contract is actually between the client and the regulated firm. The adviser is either an employee, a ‘partner’ in a business, or an appointed representative of the regulated firm.
That means when an adviser sells a book, they are not selling contracts with clients that they own personally. They are transferring the goodwill and the ability to introduce and maintain the client relationships. The regulated entity remains responsible for compliance, advice standards and client care.
While the adviser may be the trusted face of the relationship, the client is legally contracting with the regulated firm.
Plainly, if the client bank is transferring over to a new agency, then we will need to deal with that as part of the sale.
What is being sold in practice
In a typical sale of a client bank, the following assets are included.
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Goodwill – the commercial value of the client relationships and the reputation attached to the business.
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Client lists and business records – including details of who the clients are, the history of dealings, and the information needed to continue providing services.
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Intellectual property and data – such as rights in the brand, website, marketing material, or systems used.
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Ongoing fee rights – for example, trail commissions or recurring advice charges.
What is not being sold are the clients themselves. A client cannot be forced to remain with the new adviser. The value is tied to whether clients stay and continue to pay for advice.
Again, if the network is changing, we will need to deal with a bulk transfer of the agency of the clients to the new network or firm.
How much is my client bank worth?
Valuing a book of business is not a straightforward science. Buyers often use a multiple of recurring revenue, sometimes adjusted depending on retention rates and compliance standards. The stronger the client loyalty and the cleaner the compliance record, the higher the multiple.
Factors that will increase value include long-standing clients, high levels of recurring fees, and evidence that the business is not dependent on one individual. Factors that reduce value include poor compliance records, a history of complaints, or revenue that is highly reliant on a single adviser’s personal reputation.
In many transactions, the purchase price is structured with an upfront payment followed by deferred payments or an “earn-out” linked to how many clients stay after completion. That structure reflects the reality that retention is never guaranteed.
By way of example, here’s some multipliers of EBITDA that I have seen recently:
|
Type of business |
Typical valuation basis |
Estimated range of multiples (of EBITDA) |
|---|---|---|
|
Accountancy practice |
Recurring fee income, adjusted for retention and partner dependence |
0.8x – 1.2x recurring fees (often equates to 4x – 6x EBITDA) |
|
Insurance broker (general) |
Commission and renewal income, stability of book, insurer relationships |
2x – 4x EBITDA (sometimes higher for niche or specialist brokers) |
|
Financial adviser / IFA |
Ongoing advice charges and trail fees, client demographics, compliance quality |
3x – 8x EBITDA (sometimes expressed as 2x – 3x recurring revenue). Can also be valued based on Assets Under Management (AUM). |
Asset sale v Share sale
The legal structure of the deal matters.
In an asset sale, the buyer acquires only the defined assets, such as the client records, goodwill and intellectual property. The seller retains the legal entity and any liabilities not specifically transferred. This structure is common when the buyer wants the client bank but not the whole history of the firm.
In a share sale, the buyer acquires the entire company, including all of its assets and liabilities. This can provide continuity but also means taking on responsibility for historic compliance and potential claims. Share sales usually require more detailed due diligence and more extensive warranties and indemnities.
The choice between the two will depend on the buyer’s appetite for risk and on whether the seller is looking to exit the business entirely.
From a Seller’s perspective, it is usually better to sell the shares in your limited company, unless you need the company for eg consultancy.
The role of regulation
Because most financial advice is regulated by the FCA, any sale of a financial services business must take account of the regulatory framework. If the seller is directly authorised, changes of control often require FCA approval. If the seller is an appointed representative under a network or principal firm, the principal must agree to the transfer (and may make exit charges, or retentions on commissions for clawbacks).
Regulation also governs how clients are informed of the change. Clients may need to be notified and in some cases must give consent before their data and arrangements can be transferred. Transparency and fairness are key. Any attempt to move clients without complying with data protection and FCA rules can create serious problems.
The importance of client consent and retention
The single biggest factor in the success of a book sale is whether the clients remain with the buyer. Even the best-drafted contract cannot force clients to stay.
That is why communication is vital. Clients should be reassured that their service will continue, that their records are secure, and that they will not be disadvantaged. Sometimes the seller will remain involved for a handover period to give clients confidence in the new adviser.
From a buyer’s perspective, this retention risk is why deferred consideration and earn-out structures are so common. It protects the buyer from paying a full price for a book where a significant number of clients later leave.
Common misconceptions
There are several myths about buying or selling a book of business.
One misconception is that advisers “own” the clients – afterall, it is easy to refer to “my clients”. They do not. The regulated firm contracts with the client, and clients can move freely. What is sold is the goodwill and the expectation that clients will stay, not legal ownership of people.
Another misconception is that a book has a fixed value regardless of retention. In reality, the true value only emerges over time. A book that looks attractive on paper can quickly become less so if clients drift away or compliance issues come to light.
A third misconception is that buying a book is a guaranteed route to growth. While it can be an excellent way of expanding, it is also a commitment that comes with regulatory obligations, integration challenges and financial risks.
Risks and protections in the sale agreement
Both buyers and sellers need to think carefully about risk allocation.
From the seller’s point of view, it is important to be clear about what is included in the sale and to avoid over-promising. Sellers should expect to give warranties about the accuracy of client records, the state of compliance, and the level of ongoing fees. They may also be asked for indemnities in case of future claims arising from advice given before completion.
From the buyer’s point of view, due diligence is essential. This means carefully reviewing compliance files, complaint histories, client contracts, and revenue streams. Buyers should also seek protections in the agreement, such as retention-based payments, warranties, indemnities and restrictive covenants to stop the seller from competing.
Practical steps in a transaction
In practice the process of buying or selling a book of business follows a familiar pattern.
First, the parties agree heads of terms which set out the price, payment structure and what is being transferred. Next, the buyer carries out due diligence, reviewing all relevant records and information. After that, the sale agreement is drafted, negotiated and finalised. Finally, the deal completes, with client communications and regulatory notifications following soon after.
Although the outline is simple, the detail is what matters. Each stage requires careful legal and financial advice to avoid pitfalls.
Conclusion
Selling or buying a book of business in financial services can be a valuable and legitimate transaction, but it is often misunderstood. Clients are not bought and sold. What is transferred is goodwill, information, and the ability to maintain and build on existing relationships.
The value lies in the expectation that clients will stay, that the compliance record is strong, and that the buyer can continue to generate recurring income. The legal structure, regulatory approvals and contractual protections all play an important role.
For advisers considering either side of the transaction, the key message is this: do not rely on marketing language or assumptions. Understand exactly what is being transferred, take professional advice, and make sure the contract reflects the commercial reality. Only then can you buy or sell a book of business with confidence.
Next Steps
If you are thinking about buying or selling a client bank, get in touch. I’ve helped many IFAs, insurance brokers and accountants to sell their business or buy a new client bank for growth – it is definately an area of expertise for me.
I’ll bring that experience together with great lawyering and some personality, and provide Remarkablaw®️ service – get in touch today.