Financial advice business valuations look set to slide in the coming five years as numerous headwinds put increasing pressure on the industry, according to Chase Corporate Advisory.
In its latest market commentary, the company cautioned that the average premium valuations for practices over the last five years will likely decrease as more advisers look to exit the industry.
“There are a number of well documented headwinds facing the financial services industry in the coming years,” the company said.
“As with all change and disruption these bring both opportunities and challenges based on your individual perspective, circumstances and willingness to adapt and seize opportunities as they present themselves.”
Chase Corporate Advisory identified four challenges facing advisers and putting pressure on the industry; the increased education standards to be implemented by FASEA, the recommendations to be made by the royal commission, potential changes to small business tax concessions, and ongoing strength in US equities.
“Going forward we are of the opinion that there will be a greater polarisation in both the quality of financial planning firms and the valuation multiples those firms ultimately attract,” the company said.
“All this points to what we believe will be a significant number of planning practices available for sale in the ensuing years. Interestingly a large number of advisers have stipulated that 1 January 2024 will be their retirement date.”
The company expects that the existing seller’s market could be turned around into a buyer’s market “if all this comes to fruition”.
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