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Opt-in pushing planners out before FOFA

The number of financial planners looking to sell their business seems to be increasing, partly due to concerns around the Future of Financial Advice (FOFA) reforms, says business broker John Birt.

“We’ve been flat out since Christmas, as many as 80 transactions at any one time,” says Birt, who heads up Radar Results on the NSW central coast.

“There’s been a lot more activity in the market and a noticeable increase in vendors,” he added. “The last three months have been the busiest for us on record.”

While Birt concedes his increased workload might be due in part to the “maturity” of his own business, he also points to a number of reasons he thinks planners are getting out of the game, with concerns about FOFA one of the more commonly heard.

“A good number, maybe as many of 20 per cent of the vendors we’ve seen this year, have been wanting to sell out before the FOFA implementation date,” he said. “It’s the opt-in rule that’s the killer.”

As well as concerns about the new opt-in requirements, Birt says sellers are worried about licensing and that the grandfathering provisions have not been enough of a disincentive to get out.

Other vendors are driven by fears about broader economic factors. “Some feel the economy is going south and the value of planning businesses is going to dive,” Birt explained.


Illness, retirement and seeking a “sea-change” are other common factors listed as being behind the decision to sell a financial planning business.

But while there may be increased selling activity, luckily there is also no shortage of buyers. Radar Results has brought on eight new contracted buyers since the beginning of the year.

“We’ve even had to turn buyers away,” Birt said.

The activity seen by Radar Results is in line with the prediction made by business broker Centurion Market Makers in October 2012 that FOFA may lead to a surge in the sale of advisory businesses.

"Between now and 1 July 2013 we will see more transaction activity as retiring vendors bring forward the sale of their client books,” Centurion managing director Chris Wrightson recently told ifa sister publication InvestorDaily.

“Our level of buyer and seller inquiry has been trending up all this year, this last quarter is up some 30 per cent on 12 months ago,” he said.