Plan carefully before adding accounting: JNP Capital
Adding an accounting practice to a financial planning business is harder to pull off than advisers may think, according to JNP Capital managing director Jason Phillips.
Responding to comments by Instreet's George Lucas about the benefits of 'ring fencing' clients by diversifying into accounting services, Phillips stressed the need for a detailed strategy.
"It's not as simple as going off and buying an accounting practice," he said.
"I've seen those sort of transactions not achieve what they could have achieved, and certainly not achieve what the principals [hoped for]," Phillips said.
To successfully 'ring fence' clients, the new parts of the business need to be fully integrated into the practice, he said.
"You really want to build a client value proposition that is fully integrated, [so the] client essentially doesn't see the difference between the financial planning people and the accounting people," he said.
If a financial planning practice acquires an accounting firm and treats it as a separate entity with the two parts of the business referring clients to each other, the principals have effectively created a joint venture, Phillips said.
"You've spent all this money and effectively you've ended up doing something you could have done anyway," he said.
JNP Capital is a business broking firm that deals primarily with accounting and financial planning practices.
"From my perspective I represent vendors. I'm happy to sell whatever assets are required," he said.
But for the merged practice to succeed, the principals must put together a detailed strategy before any payments are made, Phillips said.
"It's about how you wish to operate your practice post that acquisition. I think a lot of planners fail to [consider] that," he said.
Recommended for you
With many advisers preparing to retire or sell up, business advisory firm Business Health believes advisers need to take a proactive approach to informing their clients of succession plans.
The top five licensees are demonstrating a “strong recovery” from losses in the first half of the year, and the gap is narrowing between their respective adviser numbers.
Retirement commentators have flagged that almost a third of Australians over 50 are unprepared for the longevity of retirement and are falling behind APAC peers in their preparations and advice engagement.
As private markets continue to garner investor interest, Netwealth’s series of private market reports have revealed how much advisers and wealth managers are allocating, as well as a growing attraction to evergreen funds.
