Addressing the AIOFP’s recent virtual conference, Forte Asset Solutions’ Steve Prendeville said while over 5,000 advisers had left the sector in the last year and a half according to industry data, the bulk of these exits was made up of salaried advisers with no business books to sell.
“What should be remembered is [the exodus] is largely represented by salaried advisers from banks, accountants who can’t operate with the exclusions and smaller businesses being forced out from many dealer groups’ perspective,” Mr Prendeville said.
“It hasn’t translated into a large number of sellers – these are very small businesses or no businesses represented by exit levels.”
He added that the exodus “myth”, combined with the economic turmoil created by COVID-19, was creating an undersupply of practices on the market.
“It’s also the lowest [supply] level in my 17 years of selling that I’ve ever seen, and it’s largely based on the myth that there has been a flood of businesses coming to market,” Mr Prendeville said.
“It’s also a situation where many people have got enough on their plate than to go through a sale. The gap between demand and supply is significant – I would normally be representing 10 to 12 businesses at this time of year, and at the moment I’ve got three and another three or four coming on.”
However Mr Prendeville said unlike the crisis created by major reforms such as the FASEA regime in recent years, the COVID-19 pandemic was having a net positive effect on the advice industry long-term, with some practices able to boost their earnings by hundreds of thousands of dollars by embracing remote work and increased technology use.
“We’re going to see significant improvements to client benefits, the adoption of SMAs, a move to fixed fees, the adoption of technology and businesses that are focusing on specific target markets and integrated CRM systems,” he said.
“The crisis has also been enabling a greater level of communication – we’re having multiple service relationships that are not just principal dependent, we’ve got greater levels of communication, clear value propositions going forward and a reduction of key person risk.”
Maybe because they are worth nothing like they used to be right now.
Why would advisers sell now? Its better to stay on until either 2022 (if not doing FASEA) or 2025 (if doing FASEA) and see if you can get anything then or just resign. Its a more commercial option than trying to sell your business now.
because some are forced to because the the family court has ordered them to due to a marriage breakdown.
Have a debt and have a serviced client base that’s worth who knows what. It was a retirement plan started 7 years ago but falling a bit flat now. Not sure what to do, but selling now doesn’t seem to work for me.
Adviser’s aren’t idiots. There would be no worse time to try and sell than now, hence surprisingly not a lot of adviser’s are selling right now. Why would you want to put your business up for a fie sale unless you absolutely had no other alternative?
Who would’ve guessed that mid pandemic is not an ideal time to sell a business..
So obvious isnt it…many of these so called experts writing these articles have their own agenda..even technolgy pushers overrate their products…..we talk about client and consumer behaviour..well we are human consumers as well…..we need to survive in this industry…clients have needs..so do we …and the compliance regime need to comprehend that…..otherwise this industry and kiss itself goodbye
“Adviser’s aren’t idiots…” I suggest you read the Sam Henderson article and a few Royal Commission papers, trade press, mainstream media, etc. Many think they are.
I suggest you talk to a few actual clients instead of believing everything you read.
Myth?? Not sure about that. The reasons for leaving certainly aren’t mythical but very real…
Sales would be down because the businesses have no value anymore with 12 month contracts being implemented. Not to mention there would be virtually no demand with existing advisers attempting to transition their existing client base onto non customer friendly 12 month contracts. The real question isn’t who’s selling but are there any buyers? Highly unlikely
I can’t help but think sales are down because current business valuations are very poor compared to historical values. I’m not sure how you can ignore 5000 advisers (over 15% of the potential customer base) leaving in the last 12 months as being a non-factor in the sale of businesses.
Myth’s or not, it’s sort of a weird position to take, as in normal supply and demand factors somehow don’t apply to financial planning business. I was going to buy a business 3 years ago, then the FASEA regime and LIF regime started having their impact. There is certainly no way I’d pay 3 times recurring revenue for a business now.
Once fees are moved to annual opt-in I just can’t see the justification for applying a multiple any differently to what I would an accountancy practice.
nailed it!
Will be a multiple of EBITDA. Good businesses that have addressed yearly opt ins, properly priced their services with engaged clients and digitalised there practice will and are still attracting a premium. The rest is being picked over.
We are also waiting top see what happens with the AMP so their will be an increase of sales of businesses when things are clearer with BOLR and the AMP Rod m
I thought AMP practices can only be sold within AMP?
A good message to put out if I as a broker want more practices to sell. Interestingly he doesn’t mention anything about getting good prices for the practices he does have for sale.
Most are avoiding brokers and selling direct.
i sold in late 2019 although it took almost 12 months to get there (without a broker). It just depends on your practice size, what your niche is and demand for the type of business. I’m also contracting back for a good integration of clients and warm handover during this period. Not the best timing but hindsight as they say is 2020….(pardon the pun for those who got it)
I have 10 people to call when I hear a business is for sale and there is massive demand for quality businesses. Why go through a broker who takes enormous margin when there is huge demand. Poorly run businesses will get the valuation reflecting their business state but businesses with strong client engagement and average fee per client over $3k will receive a strong premium.