The latest RADAR practice valuation results for August 2018 show the multiple on grandfathered trail commission is down 25 per cent, life insurance multiples have fallen by 8 per cent and investment and superannuation clients over 80 years of age have plummeted 30 per cent.
Forte Asset Solutions managing director Steve Prendeville told ifa that there is no doubt there is downward pressure on values in the current climate.
“I am valuing grandfathered revenue at two times a 30 per cent devaluation,” he said. “While RC recommendations are non-binding, any government will go with populist sentiment and likely in act without due consideration of ramifications.”
According to Adviser Ratings, more than 7,000 planners have left the industry since 2015. UBS data suggests that 14,724 exited in last five years.
Earlier this year, an ifa reader poll indicated that the majority (76 per cent) of advisers plan to exit the industry once FASEA’s mandatory education standards are introduced.
The AIOFP is urging all advisers who have decided to leave the industry over LIF, grandfathered revenue and FASEA speculation to rethink their strategy.
“This evolving ‘stampede mentality’ is negatively disrupting the supply and demand dynamics of price with the only winners being the purchasers. It is such a tragedy that advisers are suffering capital losses on their life work when it may not be necessary,” the association’s executive director, Peter Johnston, said.
“The latest RADAR practice valuation results are showing that all practice types are suffering significant valuation reductions with blame levelled at ‘being spooked’ by the royal commission with grandfathered revenue, LIF, the proposed exam and FASEA speculation.”
Mr Johnston told ifa that the recent departure of the prime minister Malcolm Turnbull and relocating of the minister for financial services Kelly O’Dwyer is great news for the industry.
“We believe prime minister Turnbull had given Minister O’Dwyer permission to go in hard at our industry mistakenly believing the advisers were the only industry problem. The findings of the royal commission with institutional behaviour emphatically refutes this position,” he said.
“It should be emphasised and recognised that any royal commission recommendations are just that, they are not binding.”
The AIOFP spokesman reminded advisers that ASIC are the “police” of the industry and any decision on banning grandfathered revenue will need to legislated by the politicians due to the contractual obligations with the institutions.
“With a looming federal election and political parties not wanting to upset 25,000 advisers and 50,000 support staff, any move on grandfathered income is at least 18 months away,” Mr Johnston said.
“This now leaves a more sympathetic Morrison government that we believe will modify the FASEA model but they may not be there for very long, we will then have the architect of FOFA to deal with – a Shorten government.
“It is now time for the advice community to unite and put in place a new political strategy that protects its position in the industry. Clearly the past political regime of relying upon institutionally aligned associations to protect advisers has not worked and will never work due to the minority role advisers play in their membership and/or revenue source.”
Can’t understand why they say life practice valos are down with a straight face. If anything they’d be even more valuable by now with the investment business potentially/probably being ravaged with the new grandfathering rules. Grandfathering changes are not relevant to life books and a good life book is pure gold with renewals – these are not touched by the amendments. Bit of unnecessary scare-mongering and business chasing by Radr Results it appears.
really? insurance has been exempted up until now but dont think it’s safe after whats been heard at the Royal Commission. If/when Labor gets in, it’s all set for change. they will decimate this industry.
plenty more destruction to come in the next couple of years. I wonder how long it will take those stupid politicians to wake up?
A truer word never spoken….”Clearly the past political regime of relying upon institutionally aligned associations to protect advisers has not worked and will never work due to the minority role advisers play in their membership and/or revenue source.” HELLO FPA and AFA!
What idiot would buy another practice or book? Are you completely nuts?
Not only have values plummeted and buyers getting scared away by litigation and heavy compliance issues but there is a much larger storm brewing.
ASIC are actively pursuing planners and dealer groups to make EVERY SINGLE CLIENT FILE reflect clear evidence that they have received adequate and concise service in line with what’s been charged or promised.
Every adviser will be pursued and litigated to refund clients every single dollar. Guess what? You might of retired from the industry or thinking of retiring but you will be hunted down and be forced to refund every dollar.
Dont believe me? It’s happening right now at AMP and other dealer groups.
The company or dealer are not going to wear the hit. They will chase you down and get it back off you, retired or not. Sold practice or not. Get your cheque books ready people.
You all have clients that got no service but you earnt the trail. It’s now a debt hanging around your neck sorry.
Johnno from AIOFP is hilarious. He doesn’t quite understand the ‘new’ landscape. It reminds me of why Kodak went bust. They didn’t adapt quickly enough.
Trying to disquise your lefty industry fund leanings using sarcasm isn’t working you troll. I applaud what AIOFP is doing. I already have over 50 signatures in 1 week on the petition! AIOFP is bringing balance back to the conversation or would you rather one side has all the power and control and takes advantage of the little guys? There is nothing “new” about this landscape as it is only one group trying to force their ideas and will upon another group to fulfill their own agenda.
Mate, I’ve got my own business as an IFA and think the same as ‘Johnno for PM’. There is no political benefit for the LNP to step in and ‘save’ financial planners after the RC. There is no love for us from Labor. We will get the sharp end of the stick from both sides of politics. Johnston probably still believes he can get the money back from Astarra….seriously deluded
Exactly , so get out now before Mr Shorten and the Industry funds expand ” General Advice ” to include yes rollover now to save fees ? as per CBUS ( MER now 1.37% but they don”t have to disclose that ) Why not ASIC ? Front page rollover now button when you log on as a member and just press Sumbit !! and to be introduced auto rollover to pension streams without any advice , a 4 hour ASIC/ FASEA exam where is the FPA objecting to this and a $5,000 fee per planner for ASIC annual Audits ? Or adapt quickly to the new landscape you say ??
Agreed. Too many firms facing their own Kodak moment in the next 4-5 years.
It irritates me to see all the Industry Super keyboard warriors come out with their cheering gloat everytime a negative article is published that slams IFA’s – unfortunately this is exactly what the regulator and politicians, who are all in the back pockets of Unions and Industry super funds, wanted! I would like to see an Industry Super fund try to explain to a customer claimant why their TPD claim isn’t getting paid because of their watered down group insurance cover that failed the work test, or try to construct a complex aged pension and centrelink strategy to an old pensioner who just lost their husband after 55 years of marriage. This is where IFA’s shine and eclipse the Industry funds and provide real value yet we are being hung, drawn and quartered in the public squares because of the politicians ignorance and incompetence and the banks greed and lust for money and power! Carry on I say, because you will not break me!
Yes mate, good and real IFA’s do exist in the real world and will always shine through the crap the government has allowed to happen.
Hang in their IFAs we are needed more than ever.
Actually I think that much like the “Russian trolls” that got on Facebook to influence people, this site has been infected by the people working for GetUp! To quote GOOGLE, “GetUp! is an Australian left-wing lobby group. It was launched in August 2005. Its funding came from individuals, organisations, community groups, and trade unions.”
the Union Super Funds will just blame it on the insurers. They wont disclose to their members that the rules are set by them based on how much they are prepared to pay for insurance premiums. Pay peanuts get a shit policy definition.
I’ve seen one case where a member was denied a payout by the Trustees of a Union Super Fund because on the day the cover passed from one insurer to the next, the member was off work sick, and didnt meet the ‘at-work’ clause despite being a member of the fund for many years and also having premiums deducted. The new insurer assessed the claim & approved it, but the Trustee denied the claim based on the ‘at-work’ clause. One can only assume that this was done to keep their claim rates down so that they stood a better chance of participating in the profit-sharing pool if claims remained under the benchmark. Makes a mockery of the claim “we’re all in this together”
Its strange that those saying this industry needs a clean up, dont ever seem to propose a clear strategy as to how? They do not seem to think about the ramifications and precendents set not only for the financial services industry but other industries as well. Money for nothing was the hgeadline of the RC when it came to institutions. Funny that. Money for nothing is also the lament of investors in superannuation as they lose 15% in contributions tax and 15% (max) for an earnings tax. If we are serious about reform, then why was tax reform of the super system ignored after the Henry Tax Review. Hypocritically, to slam the financial services industry to explain away failed polcies may seem popular sentiment. The economic reality of an ageing population and debt levels for households at nightmare levels, the argument I would think is to have quality advisers and not incompetent politicians and commentators with not a clue as to how to remedy the mess we as a nation face running around with ignorance as their guide.
you are a sad person – if you were a planner, you might show some empathy and compassion…
So glad I sold at 4 times multiple but, my health has suffered somewhat
is that because you sold to AMP/Charter?? probably…
Well said. If advisors are only interested in being in the industry because of their unearned commission structures then it is about time they left.
Mr Johnson is dreaming.
With the wave of populist sentiment rising, and the banks more than happy to say “look over there!”, Mr Johnson talks about contractual commitments with the big institutions. Boy, is the Royal Commissioner scared. I’m sure AMP and Chairman Murray also have every intention of fulfilling BOLR commitments.
I can see the ‘pub test’ now (a politician’s favourite barometer) – yes, Mr Smith, your local adviser has EVERY right to their retirement fund (cough) – I mean contractual commitment – of 4 x annual commissions with NO obligation to provide you with an ongoing service. This will be paid for by YOUR super fund.
Mr Johnson, you’re a funny guy. Is it any wonder this industry needs a clean up.
Hey mate, I think you’ll find the AIOFP doesn’t have any AMP Advisers and BOLR to protect.
Given Mr Johnson has been trying for decades to help and support non bank and non institutionally owned / run advisers, no doubt he has done bucket loads more to help real advisers than your little whinge above.
Once the RC slows down, perhaps Mr Johnson can walk us through his thoughts on how the Chairman of the AIOFP explains setting up a structure (funded by clients) to assist his FP business to expand by using it as a borrowing source?
I’d love to hear that one!
Here here! well said. Mr Johnson has worked hard for IFA’s for years and is now finally getting some press mainly due to the massive failings of FPA and to a lesser degree AFA.
Rigggght. Because protecting grandfathered commissions is a morally worthy cause. I’ll leave you to explain that one to the man on the street come election time.
While Mr Johnson may not be connected to AMP, grandfathered commissions certainly form the backbone of AMP’s BOLR agreements. And Mr Johnson is defending GF commssions. Let’s see what David Murray (and as a consequence ScoMo and Frydenberg) think about that.
How’s that for a whinge?