According to analysis from Radar Results, firms with $100,000 to $200,000 or recurring revenue fear the findings of the royal commission may shake up the market.
It noted the incoming FASEA requirements are also scaring advisers into making an early exit, as well as the lower up-front commission system and the new two-year clawback period for commissions.
As a result, prices paid for smaller risk books move between two and three times the annual recurring revenue.
On the larger end of the market, Radar Results said large risk insurance businesses with between $1 million to $3 million in annual recurring revenue can command far higher multiples.
It found buyers of these large risk businesses last year were funded at an average multiple of more than 3.5 times the recurring revenue.
“Some banks have said that they can’t lend enough money to financial planners for acquisitions, but unfortunately, they have also increased the minimum loan that they will approve to $1 million,” Radar Results said.
The minimum loan to buy books is $1 million ??? Why do i find that hard to believe . Then again peer to peer lenders are increasing rapidly !!!
I had a risk book with less than $100k revenue.
Revenue to be cut, close to 60%.
Operating costs already up, will go up higher especially PI.
Leasing cost increase by CPI.
A client service offer gets paid more than what I do, with significantly less risk.
Risk/Reward.. let’s be rational.
I guess we need to know what a “smaller” advice firm will look like in the near (and distant) future.
we have taken the decision to be much bigger and to reinvent ourselves, whether this proves to be the best decision is something we will discover in time. whatever the outcome, much pain and cost could have been averted had a more measured and well thought out transition process been adopted by our political masters. however, we are nothing if not resourceful, and will strive to overcome the hurdles placed in our way. im guessing the real impact of L I F is slowly beginning to bite, the traditional “Risk” client is not one used to paying a fee to buy life insurance, and we have seen this reflected in our cash flow.
On that Happy Note, i wish one and all a Merry Christmas and a safe and prosperous new year.
LNP has done a stellar job looking after small business….O’Dwyer is a disgraceful bank/insurer lapdog
You do know that before she was picked to be the member of higgins she was one of those investment bank types at the NAB. Not that NAB has any kind of IB pedigree.