Time to sell?

There’s really no such thing as an ideal time to sell your accounting or mortgage business, but if you have a financial planning business, now is the time to seriously consider selling. So, why now?

For several years, there’s been a lot of poor media on the planning industry, and with two parliamentary inquiries underway and a third one to start soon, the spotlight on financial planners is only going to heat up.

The educational requirement on planners has always been questioned, and the recommendation from industry associations is that a transition is required. If you don’t want to start a University Degree course or the equivalent, it’s time to retire or change professions. If your business is primarily investment focused with a lot of shares and your adviser service fee is aligned with the accountant balance, be wary of your revenue falling in another share market crash. With the world in political turmoil, October being the worst month for corrections, and after three years of upward share market movement, a downturn is expected. Another reason for planners looking to find a buyer now is finance. Just over 72% of clients signed with Radar Results require finance to buy a business or client register. Shortly after the GFC, you couldn’t get a cent of finance; banks are now nearly giving it away. With rumours swirling of interest rates set to increase and a second GFC on the way, now is the best time to sell.
The change to a fee-for-service model from the commission system will eventually reduce the value of your planning business. Recurring revenue multiples are set to be replaced by profitability valuations. However, the recurring revenue multiples being paid for financial planning businesses and client registers are currently at an all-time high, which can be attributed to the demand by buyers.

Radar Results, Australia’s largest buyer’s agent’s service, has over 200 financial planners and accountants under contract looking to buy businesses. Some have purchase budgets of $5M to $10M, while others want to spend just a few hundred thousand dollars. Cross selling other services, such as tax returns, loans and property sales is also holding up today’s ‘higher than normal’ prices.

The biggest concern I’m seeing is financial planners wanting to sell, but not having the business ready. Many still do not have a ‘press a button’ client list, or are not fully paperless. The old school planner from the life insurance days of the 70’s and 80’s wants to hang on and die with their business. They don’t actually want to die at their desk, they just don’t know how to take that next step.