Financial planners, like many others in the professional services space, are in the business of selling ‘advice’. Advice around how, where, when, why and what decision making is required to accumulate and protect assets at various stages in their lives. Often, this advice is about assisting clients to avoid making poor decisions. One of the most critical times for client advice comes ahead of retirement, when a person needs to clearly assess and manage his or her ability to support their lifestyle as they could have limited future earning or accumulation opportunity.
Similarly, many practice owners I work with find themselves in most need of advice when they embark on the major decision to sell their practice or to establish a succession planning initiative that requires a process to deal with valuation, funding and control.
The reasons for selling a practice are varied and while selling leads to retirement for many, for others it may be about reducing workload, changing careers, pursuing other interests, or simply the need to realise value to assist with retirement funding. Whatever the reasons, there remains a lot to consider to find the right party to transact with and maximise sale value.
Let’s look at it this way. When benchmarked against the average family home, a financial planning practice is an extremely valuable asset. However, time and time again, I see practice owners not preparing well when it is time to sell this valuable asset and many do not seek the critical advice required to maximise the value of the business. Poor preparation, knowledge gaps and lack of experience in selling a complex valuable asset often equates to disappointing results at the time of sale. It’s not surprising, considering most owners will have limited experience in selling a business and tangible asset worth hundreds of thousands or millions of dollars. Why would they? They are in the business of selling financial advice.
And yes, I am well aware of the irony.
No one is good at everything. As business professionals, we surround ourselves with many advice providers to guide us through unknown, complex or specialised scenarios. We have business advisers, mentors, lawyers, taxation specialists and accountants all at the ready when we need to tap into their expertise. Why is it then that so many financial planners do not seek advice at the time of selling their business? It’s a complex process and often a new experience for them and the buyer, and thus both parties have limited if any experience. Add to this the fact that buyers often have greater previous transaction experience than sellers and the odds start to stack up against the seller. Surely advice in this situation would be valuable? Particularly advice that can lead to a 10 to 20 per cent premium on a sale price.
Chris Wrightson is chief executive and director of Centurion Market Makers
