Traditional partnership equity model broken
The traditional accounting partnership equity model has broken down and is no longer relevant or able to support mature age partners to exit and retire, according to Connect Financial Service Brokers.
Connect founder, Paul Tynan, said this was due to young industry entrants who preferred not to take on debt and had no confidence in the capacity of the business to address the changing accounting landscape challenges.
He noted that the number of buyers continued to outnumber accounting and financial planning sellers despite heighted merger and acquisition activity since the beginning of the year.
Tynan warned that many accounting firms were unwisely entering into licencing arrangements they would regret as financial planning/ institutional dealer groups continued to aggressively attempt to licence up every accountant to their network.
“Unfortunately their exit goals have been dealt a significant body blow as the new entrants to the financial planning industry (and potential buyers) will struggle as small and medium enterprises in their all-important start up years,” he said.
“Buying an existing business under a new Australian financial service licence will mean no trail brokerage can be transferred thus deterring the next generation of planners to enter the market.
“With the increases in compliance, licencing, [and] profitability index, new entrants will have no option but to start their financial planning career with an institution.”
Tynan said mature age planners would have to decide on whether to sell in the current market or hold on to receive the income stream of the current business, and would have to deal with health and personal capacity issues.
“Accountant and financial planners are confronting the ‘exit and succession perfect storm’ and staying out at sea in a rapidly deflating life raft is not the answer,” he said.
“If now is not the time to sell – then when?”
Tynan said accounting practices were in demand especially if they had a robust exit and succession program underway supported with outsourced processes, utilised technology, and had modern human resource practices that up skilled staff capabilities.
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