Weak supply boosting valuations: Prendeville

financial-planning/FOFA/financial-advice-reforms/future-of-financial-advice/director/

11 May 2012
| By Staff |
image
image
expand image

Financial planning practice valuations have returned to three times recurring revenue as weak supply fails to meet demand, according to Forte Asset Solutions director Steve Prendeville.

Older planners are deferring their retirement strategies due to their low superannuation balances, leading to a lack of businesses up for sale, he said.

"It's probably one of the tightest markets I've seen on the supply side. I'm receiving probably 15 buyer enquiries a week, and I cannot fulfil the demand. There are only a couple of new businesses coming on each month," Prendeville said.

Demand for planning businesses is strong - particularly for books of business worth around $200,000, he added.

But confidence among planners that revenue streams will be safe under the Future of Financial Advice reforms has led to fewer book sales, Prendeville said.

The industry in general is "becalmed" at the moment, with existing clients parked in cash, he added.

"We're still seeing very little new business being generated, as reflected in some of the platform net outflows," he said.

While valuations are at "three times or greater", highly profitable businesses can attract as much as 3.3 or 3.5 times recurring revenue, Prendeville said.

"However, large businesses must be profitable after debt servicing, and very few are taking into account synergy benefits - and that's why the demand is more on the smaller end than the bigger end," Prendeville said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 4 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 5 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 3 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks 1 day ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND