According to its new report, Deal or no deal, this is largely due to recent transactions within the advice space and the growing number of practices for sale.
Recent transactions that suggest broader market sentiment, according to AZ NGA, include the sale of Count Financial to CountPlus for $2.5 million and Fiducian Group’s $3.5 million purchase of MyState’s financial planning arm.
One of the first things the report suggested for potential buyers to consider is determining whether they are a value or growth investor.
“Growth investors look for premium assets that exhibit above average growth. They usually come with a premium price tag,” the report said.
“Value investors, on the other hand, typically look for undervalued or mispriced assets that need a bit of work.”
Based on its own experience, AZ NGA said most of its clients act as both growth and value investors, of which the current market presents opportunities for both.
“Public information on sale prices and terms is hard to come by but valuations have generally come off in the past year,” it said.
“Having said that, to participate in this market, buyers need to be cashed-up because while interest rates are ultra-low, access to capital is constrained.”
For practices on the sell side, AZ NGA said it has learned that, over the past five years, the highest bidder doesn’t always end up closing the deal.
“The main reason for that is access to finance. Quite often they just can’t get the money in time, or at all. This creates an opportunity for the second and third in line. This pattern is becoming so common that sellers are increasingly skipping straight to the under-bidder if they know they’re good for the money,” the report said.
A pure risk book is still in high demand and golden. With commissions coming down and existing high renewal amounts not touched by LIF, a good risk book is still worth at least 3x renewals. It is a gem in such times of uncertainty to have a solid and reliable source of risk based income. Only risk though – all others are a concern.
Let’s see what happens next year with residuals on existing AMP policies following the sale to Resolution Life – assuming that is completed of course.
I actually can’t believe someone wrote this… I feel you’re very out of touch if you think this is right.
Argue against it with facts and logic if you can, not just emotion and I may listen to you then. The facts don’t care what you think, a renewal stream from a risk book is indeed a golden investment. It is a source of new business AND a reliable source of income while other sources like commissions are reducing. What’s not to love. Where is your argument, seriously?!
When AZ NGA purchased Henderson Maxwell prior to the Royal Commission, was this a value or growth investment? Or just a bad investment?
Having debt as an industry implodes and dies is not a smart idea. Accept your retirement plan has gone the way of taxi licenses and hang on as long as you can.
I still feel that good clean books are worth picking up, but more and more there needs to be 1) strong synergies between buyer and seller in terms of charge out, platform usage and investment philosophy and/or 2) the buyer needs to have some serious upside power, keeping in line with BID and the Code, to move the client elsewhere and monetise that.
I’d suggest 2.0-2.2x is still achievable though, what does everyone else think?
With annual fee agreements why would you pay more than 1x?
Couldn’t agree more with this but I’d go one step further and say I’d just pay $1,000 per client call it a marketing fee. Your books are worth nothing now. Just don’t buy them and then clients will seek out advice anyway.
Define a ‘good, clean book’ these days?
2 to 2.2 times profit or recurring?
3 – 3.5 X renewals is still a fair price for a good clean risk book. The case for this is even stronger with new business commissions coming down! A supplementary income stream in the face of this idiocy we currently face is invaluable. Clients under age 60, good followup and a good electronic database with notes and records – clean client base definition. It is a rare thing and to be grabbed with both hands when found!
who wants to buy a ticking time bomb. yep, no one.
According to the AZ NGA website, “Paul (Barrett) established AZ NGA in 2015, after a stellar career as a senior executive at some of Australia’s largest banking and financial services institutions including the Commonwealth Bank of Australia and ANZ Bank.”
Having already overpaid for multiple businesses, now gotta love the modesty here from Captain Obvious.