Demand declines for accounting practices
Financial planning practices are seeing high demand from buyers for their businesses, resulting in price hikes, but lack of confidence was preventing accounting practices from reaching the same heights, according to Radar Results.
Sole Accounting practitioners as well as those in partnerships had higher levels of business costs such as salaries and could not pass the full effects onto clients.
Radar Results principal, John Birt, said taxation clients were now demanding more, were more selective with the services they sought, and were more sceptical of the notion of value-for-money
"Accountants need to do more than just lodge tax returns. Many are under-charging, which I feel is a confidence issue," Birt said.
"Accountants that provide advice, administration and compliance work to their SMSF [self-managed superannuation fund] clients are either over-charging by an exorbitant amount or in many situations not charging enough."
Prices ranged from $895 per annum for a full year's work for an SMSF to $8,000 per annum for the same work. Clients were also paying less for individual tax return clients.
"The main steadier for accounting practice prices is the demand by financial planners looking to reach a large number of prospects to sell loan/s, planning services, SMSF set-up and advice, along with risk insurance products," Birt said.
Low interest rates and abundance of finance means prices being offered to financial planning businesses or client register are at the highest level they have been in eight years.
Birt cited the example of AMP, saying it has changed its Buyer of Last Resort (BOLA) formula, which resulted in non-AMP products being in the same category for valuation as AMP products. This also applied to Charter and Hillross practices.
"AMP Bank is offering their financial planners loans to expand, some at interest rates of seven per cent fixed, principal and interest over 10 years," Birt said.
Moreover, "baby-sitting", which is where licensees wanted to keep their own advisers, has also pushed up prices, with some medium-to-large licensees purchasing practices themselves temporarily until they found another adviser to join their group, with the purpose of then on-selling it, thus retaining existing clients and revenue.
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