Planners “chopping up books”
Planners who find their business is too large to sell easily are "chopping up the books", according to Radar Results principal, John Birt.
Birt said this practice could often leave the seller better off.
"Instead of waiting months or even years to find a buyer who wants a large business, sections of the book — like the mortgage loan trails — can be on-sold easily and quickly, allowing risk clients, investment clients and even accounting clients to be separately offered to different buyers," Birt said.
"Generally the purchaser is likely to pay the seller a higher price for the individual sections because their appetite has been satisfied."
According to Radar Results' analysis, risk clients are still the most valuable and are selling for up to 3.8 recurring revenue. However, client groups with cross-sell potential have become increasingly popular with buyers in the last few months.
"The number of mortgage clients has increased due to the demand for this style of client and trail revenue, with cross-selling opportunities being the main driver," Birt said.
Accounting fees have risen on the back of buyers' demand and are now selling for 0.8 to 1.2 times recurring revenue.
"Once again, cross-selling opportunities with accounting clients, along with the ability to offer a ‘one stop shop', are the drivers here."
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
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.
