If you have had even one conversation about selling your advice firm, you will have heard a number followed by the letter x. Three point five times recurring. Four times recurring. It is the shorthand the whole market runs on, and it is worth understanding properly, because the difference between a casual use of the phrase and a precise one can be worth six figures on a firm of ordinary size.
This article explains what the multiple actually measures, why the market prices advice firms this way rather than on profit alone, where the average currently sits, and how to convert a multiple into a price you can sanity-check against your own numbers.
What a recurring-income multiple is
A recurring-income multiple is a price expressed as a ratio of one year's recurring revenue. If your firm generates £300,000 a year in recurring income and a buyer offers a 4x multiple, the headline price is £1.2 million. That is the whole mechanism. The complexity sits in the two words either side of the ratio: what counts as recurring, and what the headline price actually means once deal structure is applied.
The multiple is not a valuation method in the academic sense. It is a market convention, a compressed way of comparing offers and firms. Behind every multiple a serious buyer has run a fuller model: what the client bank will cost to serve, what attrition they expect, what integration will cost, what margin the revenue will produce inside their business. The multiple is the output of that work translated into a number sellers can compare.
Two buyers can quote the same multiple and mean quite different amounts of money once payment terms, deferred consideration and earn-out conditions are included, which is why the multiple is where a negotiation starts, never where it finishes.
Why the market prices advice firms this way
Most private businesses sell on a multiple of profit, usually EBITDA. Advice firms are unusual in that the dominant convention, particularly for smaller and owner-managed firms, is revenue-based. There are practical reasons for that.
The first is that recurring income in an advice firm behaves more like an asset than a sales figure. Ongoing advice charges are contracted, paid monthly or quarterly from client portfolios, and persist year after year provided the client stays and the service is delivered. A buyer is not purchasing your ability to win new business; they are purchasing a book of existing revenue with a long observable history. Revenue of that character can be priced directly, in the way a landlord prices a building on its rent.
The second is that reported profit in an owner-managed firm is close to meaningless without heavy adjustment. Owner salary and dividends, family members on the payroll, the car, the pension contributions, the office the owner happens to like: all of these make the profit line a statement about how the owner chooses to take money out, not about what the business earns.
A buyer would have to normalise all of it, and for a two-adviser firm the normalised figure often says more about the adjustments than the business. Recurring revenue is harder to dress up and easier to verify against provider statements, so the market prices the thing it can verify. For firms large enough to have a genuine standalone profit line, the convention shifts, which is the subject of EBITDA versus recurring income.
The third reason is comparability. A market with many small transactions needs a common yardstick, and recurring-income multiples give buyers, sellers and brokers a shared language. When you hear that the market average has moved, it is this measure that has moved.
What sits inside recurring income, and what does not
This is where casual conversations go wrong. The multiple applies only to income the buyer can rely on continuing, and buyers police the boundary hard.
Inside the definition sit ongoing advice charges: the percentage of funds under management, or fixed ongoing fees, that clients pay for the continuing service. This is the core of the calculation, and for most firms it is the overwhelming bulk of the qualifying figure. Regular contracted retainers paid for an ongoing service generally qualify too, provided the service is documented and demonstrably delivered. Trail commission on legacy business may be counted, but buyers discount it or exclude it because it attaches to products rather than an advice relationship and erodes as policies mature and lapse.
Outside the definition sits everything transactional. Initial advice fees, implementation charges, one-off pension transfer work, mortgage procuration fees, protection commission: none of it recurs by contract, so none of it attracts the multiple. A firm turning over £500,000 of which £150,000 is initial fees is, for pricing purposes, a £350,000 recurring-income firm. Owners who quote their turnover when a buyer asks about recurring income lose credibility in the first meeting, and it is an easy mistake to avoid.
Buyers also test the quality of what remains. Recurring income that depends on clients in drawdown decumulating rapidly, or concentrated in a handful of large relationships, or attached to clients in their late eighties, is recurring in form but eroding in substance. The multiple offered will reflect that, which is why client age matters more than most owners expect, and why the factors that raise or reduce a multiple are worth studying before you go to market rather than after.
Where the average sits now
The most widely cited benchmark comes from Gunner & Co, a broker that publishes deal data from its own transactions. Its analysis, Valuation multiples in IFA M&A market hit highest point since 2018, put the average recurring-income multiple at 4.2x in the first half of 2025, up from a stable level of roughly 3.5x across 2023 and 2024, and the highest point since 2018. The drivers it identifies are competition among buyers for well-prepared firms and greater pricing confidence following the bedding-in of the Consumer Duty.
Two cautions belong next to that figure. The first is that it is an average of completed deals through one broker, not a quote for your firm. Averages conceal a wide range: well-prepared firms with clean data, younger client banks and transferable revenue sit above it, and firms with concentration, ageing clients or undocumented ongoing services sit below it.
The second is that the buying side of this market is active and well funded, with private-equity-backed consolidators and national acquirers competing for supply, and the FCA is watching how that consolidation is executed. Its multi-firm review of consolidation in the financial advice and wealth management sector, published on Fri 31st Oct 2025, found that consolidation can support efficiency and growth but that poorly managed integration risks poor consumer outcomes, and it raised concerns about debt-funded acquisitions. It introduced no new rules, but a market under regulatory observation is one where buyer discipline on price and diligence tends to sharpen rather than slacken.
Turning a multiple into a price
The arithmetic is simple; the discipline is in the inputs. Take the last twelve months of genuinely recurring income, on the strict definition above, verified against provider and platform statements rather than your management accounts. Strip out anything transactional, anything from clients who have already left, and anything attached to a service you could not evidence in a file review. Then apply the multiple.
On the current published average, £300,000 of recurring income implies a headline price of £1.26 million at 4.2x, against £1.05 million at the 3.5x that prevailed across 2023-24. That £210,000 gap on an unchanged business is the clearest illustration of why timing and market conditions belong in your thinking alongside the firm itself.
Then treat the headline with respect but not reverence, because structure determines what you actually bank. Very few advice firm deals pay the full price on completion. A typical structure pays a proportion up front, with the balance as deferred consideration over a defined period, often conditional on client and asset retention through an earn-out.
A 4x offer with half the money contingent on retention targets you may not control can be worth less than a 3.5x offer paid largely on day one. Whether the deal is an asset purchase or a share purchase changes the tax treatment and what happens to your liabilities, which is covered in asset sale or share sale. The multiple prices the revenue; the structure decides who carries the risk of that revenue actually arriving.
What to do with this
The multiple is the market's language, so learn to speak it precisely. Know your genuinely recurring figure to the pound, on the buyer's definition rather than your own. Know which of its characteristics push you above the average and which drag you below it. And when offers arrive, compare them on structure and conditions, not on the headline ratio, because the ratio is the easiest part of any offer to inflate.
There is more on the full picture of value in what your practice is worth, including where the revenue convention gives way to profit-based pricing as firms grow. If you want a figure of your own to test against these ranges, the free IFA valuation calculator uses your numbers to estimate a range and explain the factors affecting it.