Industry reforms will reduce incentives for buyers to purchase advice practices, which will bring down their value, according to Centurion Market Makers chief executive Chris Wrightson.
Speaking at a Workplace Super Specialists Australia (WSSA) conference in Sydney on Wednesday, Mr Wrightson – who specialises in practice sales and succession planning – said FOFA and other reforms will cut earnings for advice firms, making them unattractive to potential buyers.
To regain this value, he said, practice owners will have to rethink their business models.
"FOFA and possibly reforms to life insurance commissions will remove institutional incentives to purchase advice businesses," he said.
"Obviously, when there are fewer buyers for the same amount of sellers, that's going to impact valuation."
Mr Wrightson added that even the FOFA opt-in provisions – which came into effect on 1 July 2015 – will play a role in weakening valuations.
"They have clients who will be surprised when they see they have been paying a fee and they'll have a choice as to whether they will pay or not," he said.
"That will lose clients and thus revenue and, arguably, business value."
However, there are ways to adapt to a shifting landscape, Mr Wrightson continued, with one of those including a transition from specialist advice firms into "one-stop shops".
"There are four financial advice service delivery business models in the market place now," he said, which include accounting, investments, planning and mortgage.
"The advice business of the future and the valuable ones will be where all of those sources of financial advice come from one office."
Mr Wrightson said one reason why one-stop shops will be successful is that clients are becoming more "time-poor".
"The client is time-poor and everything we've got going on, including robo-advice, doesn't save them much time," he said.
"That tells us five or 10 years from now the client will still be time-poor and if they can get their tax and accounting advice, planning advice and cash flow advice from one provider, they'll select that rather than going to see three different advisers."
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