Planners worried about acquired client losses

Financial planners looking to acquire another practice need to make sure the seller is willing to stay on to help with client transition, according to Alan Kenyon of Kenyon Prendeville.

Speaking at Synchron’s annual conference in New Zealand, Kenyon said there was an emerging trend for planning practices to extend the client transition period for an acquired practice because buyers were fearful that the seller’s clients might walk out once the transaction was completed.

“The fear for a buyer is that you’ll go round the corner and set up and the clients will go,” he said.

“You need to have a [seller] who is flexible about their tenure,” he said.

They need to be willing to extend their time in the new practice to generate new businesses and complete the transition of their clients, he said.

“Other than for health issues, or if they are moving overseas, that flexibility is pretty important,” Kenyon said.

Buyers need to be open about their track record, history and vision for the practice in order for the seller to be confident that their clients will not walk when the acquisition is completed.

Kenyon also said that planning practices should not restrict themselves to buying profitable businesses but also investigate unprofitable businesses as possible acquisitions.

“At the end of the day, what you’re doing is buying the client base and the opportunity that revenue brings, but you’re not necessarily buying a five-star main street address,” he said.

“Yes it matters what difference that transaction makes to your business, but in terms of recurring revenue and renewals, it matter what it does to your existing profit,” Kenyon said.

Kenyon also warned that anyone looking to acquire a planning practice should be prepared for a similar mindset from the seller about pricing and platforms.

Ten per cent of businesses would be sold within the next three to five years, Kenyon said.