Having conducted a number of recent seminars with industry business brokers Forte Asset Solutions, Elixir Consulting managing director Sue Viskovic told ifa FOFA has had a significant impact on value of financial advice firms.
“In terms of valuations we are seeing a much more qualitative aspect of what people are paying for businesses,” Ms Viskovic said.
“The least valuable practices are now corporate super funds, as there are so many questions about the validity of their revenues – so those multiples have dropped considerably.
“At the higher end, risk recurring is attracting a premium, and sitting around the middle is your typical advice business.”
The comments follow the Corporate Super Specialists Alliance’s appeal to the new ministers responsible for financial services to help ensure the sector’s survival.
“Fund members need access to general advice and information to help them improve their life insurance decisions and retirement savings outcomes,” said CSSA president Douglas Latto in a statement last week.
“Corporate super specialists have a long history of providing these very important services and we need to make sure we can continue to deliver them.”
Under FOFA, a conflict arises for advisers specialising in corporate super where a practitioner undertakes a super fund selection tender and provides ongoing services paid for by the super fund. The traditional remuneration model of corporate super advisers is considered conflicted under the new regime.
Chris, I used to work in corp super for an administrator. Back in the 90’s and 00’s not one adviser would have had the commission dialed down to zero. You are a rare beacon of light in an otherwise murky part of the industry.
And just on the issue of commissions… Most reputable advisers did not charge on entry (both regular, SGC and rollovers), nor did they have administration commission… As a true opt in, the only commission was attached to the group life commission, which the member could opt out of easily… Thus any comments around commission are generally unfounded for those reputable advisers in this area…
Maybe be thankful for the hidden commissions you extracted from these books in your day rather than looking for compensation now. For all FoFA’s faults, removing commission from corporate super was not one of them.
My corporate superannuation business was valued this year, three years and six years prior… Valuations have steadily declined from a perhaps abnormal high of 6x revenue, with 2x three years ago.
Now calculations are nearer 70% of recurring revenue for each member with a minimum of $2,000 recurring revenue – this is unusual in corporate superannuation, as most advisers tend to migrate their clients from corporate superannuation (only) to a selection of alternate products once they rise above (eg $1,000) in recurring revenue, as they become sizeable to maintain and the ability to provide further advice to them becomes more economical…
In a nutshell, my business with say $200,000 recurring revenue (once worth $1.2m) is now worthless (I have some large corporate superannuation accounts)…
Compensation is offered to other business that are affected by licence changes, why not us?
I actually tried to sell my Corporate Super Business. There appears to be no interest and no value in these businesses. No Government Compensation here for Corporate Super Businesses that have been decimated by Government regulations.