Handover crucial in financial planning practice sales
When selling a financial planning practice, the handover period is crucial and it is advantageous for the vendor to remain in the business for a period of 12 months or more, according to Radar Results.
Speaking at a workshop for planners considering leaving the industry, Radar Results principal John Birt pointed to a survey from earlier this year of around 800 financial advisers that suggested almost one third would not want to stay with the business once it was sold.
But Birt said the transition period was crucial, as it allowed the vendor to safeguard their interests.
Most contracts for the sale of a financial planning contract include some kind of clawback, so the purchaser can recoup some losses if the practice falls in value after the sale.
However, this loss in value could occur due to poor servicing of clients or other factors associated with the new owner, which means it is in the vendor's best interest to stay with the business for around one year to manage the transition, Birt said.
Other factors that can lead to a drop in the business and/or clients leaving following a sale include poor communication or moving large amounts of clients' money, he said.
It is best to contact top clients by phone before they receive a letter, and to have a face-to-face meeting with them early in the sale process where possible.
"Clients don't like to be 'sold'," Birt said.
Shifting all high net worth clients into new products - for example shifting the client base from BT Wrap to Macquarie Wrap in the first year - can also unsettle them and lead to clients looking for a new advisory business, he said.
Recommended for you
Insignia Financial has reached a major milestone in completing the separation of MLC Wealth from NAB, having acquired the firm back in 2021.
There could be changes ahead for how ASIC requires licensees to handle conflicts of interest as the corporate regulator announces it will be meeting key stakeholders next year to update guidance.
Proper recordkeeping has been described as the “mortar between the bricks” of the advice process and critical to an FSCP decision as an adviser is suspended for failures in this area.
As investors increasingly seek to embed ESG considerations in their portfolios, a specialist adviser has offered tips for financial planners who may feel overwhelmed in tackling these complex topics with clients.
