Planners are increasingly spurning buyer of last resort (BOLR) offers from their own dealer groups for higher-multiple offers in the marketplace, according to some industry commentators.
The commentators suggest the trend is being driven by falling average BOLR prices as dealer groups match these to falling planner revenues being experienced under the global financial crisis.
Their comments can also be seen in the context of last month’s Money Management Top 100 Dealer Groups survey, which revealed only 25 per cent of dealer groups were offering BOLR contracts in 2009.
Business Health consultancy principal Tony Stephens said he thought BOLR offers are not being offered or taken up as much as they have in the past.
“From the planner’s perspective, we haven’t seen a lot of cases recently where the BOLR is competitive in the marketplace,” Stephens said.
“This could be because people outside of the relevant group are increasingly prepared to pay a higher multiple than the BOLR represents.
“In our view, BOLRs will only succeed if they appeal to planners as sellers, and for that to happen the multiple is going to have to be at the market rate,” he said.
Guardian Financial Planning executive manager Steve Browning said any formal offer to assist planners to transition out of their businesses should include an independent market
valuation style buyout arrangement.
Browning, who has also made a similar proposal in a submission to the current Ripoll inquiry, said the dealer group now “pretty much offers a buyer of first and last option arrangement”, motivated by member planners.
“Basically we seek an independent market valuation of a business and then, if the adviser requests it, we will make an offer based on that market value.
“The adviser then has the opportunity to potentially seek other offers for the business, and we then have the option to make one final counter offer.”
Tony Fenning, chief executive of newly-merged dealer group Shadforths Financial Group, said it “does not and will not offer a BOLR facility because our members are more interested in us building a sustainable and profitable business”.
“For us, the issue with BOLR offers is that they are less about whether a member practice is profitable and more about retaining the products it uses for its clients,” he said.
