Lending criteria for financial planners misunderstood
There is a misconception that during the global financial crisis banks changed their lending criteria for those looking to acquire financial planning practices.
According to the former national manager of National Australia Bank (NAB) Financial Planner Banking, Malcolm Arnold, there has been a lot of misunderstanding about the bank’s lending practices over the last 12 months. Arnold was recently promoted to a role as regional credit partner within NAB’s business banking risk division.
“We actually haven’t changed our lending parameters,” he said at a panel discussion about succession planning at the Financial Planning Association’s national conference.
“There has actually been a slowdown in demand for credit,” Arnold said, adding that many of those looking for loans were higher risk and more highly geared, and were therefore desperate for cash.
Stephen Prendeville, cofounder of Kenyon Prendeville, consultants on the buying and selling of financial planning practices, said most banks had acted “extremely responsibly” during the global financial crisis and over the last 18 months have been looking a lot more closely at proprietors, how they ran their practice, as well as the future outlook and cash flows for the practice.
“It’s not our experience that banks have not been lending,” said. “The dominant players are still lending, although more conservatively.”
Prendeville said looking at the current market for financial planning practices they have seen a significant increase in demand from buyers. He said the Kenyon Prendeville website has seen about 40,000 hits per month by those looking to purchase a practice.
“It’s still a seller’s market,” he said.
However, he added that while markets have bounced back, very little new business has been written.
“The last 18 months have taken away any kind of comfort [for practice principals],” said Prendeville. “Everyone is looking at their businesses and what they can do better, which is what they probably haven’t done for a number of years.”
Referring to the drive for fee-for-service, Prendeville said: “There is now no complacency — people are looking at the structure of their businesses and are exploring fee-for-service.”
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