More smaller practices looking to sell
Radar Results has seen a dramatic increase in the number of financial planning businesses looking to sell.
Managing director John Birt said the consultancy firm currently had 85 businesses on its books seriously looking to sell, which he said was a fair jump from the 50 the firm had in December.
Birt said it was the highest number of sellers Radar Results had ever had, adding that enquiries from people looking to sell had definitely increased since the Future of Financial Advice reforms were announced late in April. Most enquiries were from smaller practices that operated with trail commissions.
“Over the last six or seven weeks, we have probably had between 15 and 20 trail businesses approaching us to sell. That’s an indication of what the proposed legislation is going to do to smaller businesses,” said Birt.
Birt said part of the reason for selling might also lie in the increased penalties for negligent advice — whether the negligence was intentional or not.
He said the reforms would place fiduciary duties and obligations on financial advisers that were similar to those on company directors, and which could carry the same penalties for breaches (such as hefty fines or imprisonment).
Birt conceded that if smaller planners felt they would no longer be able to cope with compliance it could motivate them to leave or retire early.
“The Government is going to be a lot more severe on financial planners who do not do the right thing, or maybe those who innocently provide negligent advice to the public,” he said.
Birt said the consequences of negligent advice might no longer be a case of paying a fine “and then it’s business as usual”.
“That’s what it’s been like for the last 25 years — not anymore. If the fiduciary obligations come in, which they will, and if you do something wrong under the Corporations Act the penalties can be very severe, and a lot more severe than they are now,” he said. “I would be concerned if I was an adviser who wasn’t that compliant.”
Referring to Bowen’s latest announcement that the ‘opt in’ for continuing advice requirements might be postponed for another two years after July 2012, Birt agreed that the Government had probably realised that it was a contentious issue that required a lot more discussion.
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