Adviser exits fail to translate into business sales
Now may be the best time to sell a financial planning business but sellers should be aware it can take up to three years for them to fully exit a business.
Stephen Prendeville, founder and director at Forte Asset Solutions, said he had been in the business for 19 years and currently had the lowest level of sellers he had seen in his tenure.
This was despite the number of advisers falling to around 17,000 as thousands exited the market.
“There is a misunderstanding about adviser exits, 9,000 advisers have left in the last three years but the vast majority of them were accountants or were salaried advisers at banks, they didn’t own any clients. There is the least amount of sales I have seen in 19 years but the highest level of demand.
“The industry has been working on the assumption that value will have crashed but prices are up to 3x recurring revenue.”
However, he warned any advisers who had planned to not sit the financial adviser exam and sell their businesses instead would be unable to achieve a sale that quickly.
“It is not like selling a house in a few weeks, it takes six to nine months to sell a business and most principals want to stay for another 12-24 months to ensure a smooth transition for clients. I would look now if you want to leave in the next two to three years.”
This left those sellers in an ideal position of being able to pick the right business for them and one that would culturally-align with their business and clients.
“It is the best sellers’ market, they have plenty of choice to pick the right buyer from and to pick with confidence that it will be the right fit for their client.”
AUTHOR
Laura Dew
Recommended for you
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
New Zealand’s financial regulator is following the footsteps of its Tasman neighbours and proposing to conduct a review on improving the accessibility of financial advice and advice business models.
