Due diligence needed for advice partnerships
More accounting firms are entering into joint ventures, licensing arrangements, and mergers with financial planning firms but many partnerships are formed without due diligence which could lead to "messy divorces".
Such was the warning from Connect Financial Service Brokers chief executive, Paul Tynan, who said the trend of forming partnerships was a positive sign as the financial services sector transitioned to a fully professional advice focused service offering.
"Unfortunately, many of these alliances are being undertaken in haste with poor due diligence and non-aligned/incompatible cultures and lack of appreciation and understanding of the partner business structure," Tynan said.
"As an outcome, we can expect to see some messy divorces in the future as these arrangements disintegrate."
Tynan also observed that the current structure of the financial planning industry is quite literally deterring potential planners from entering as they would be self-employed practitioners. Business owners were struggling to find a small book of clients needed to start a commercial enterprise.
This lack of small book of clients in the marketplace discouraged potential planners and dissuaded the new generation.
"Unfortunately this is yet another consequence of the industry's concentration with the majority of licence ownership in the hands of six corporate entities. A further outcome of concentration is the industry's buyer of last resort (BOLR) arrangements that has further incensed many and contributed to the lack of books on the open market," he said.
"The organisations and licensees who have a BOLR structure would say that this is the way they attract new planners into their business model. In contrast I receive enquiries on an almost daily basis from financial planners who regard BOLR books as just telephone numbers and have been purchased at overinflated industry prices."
Furthermore, generation X, Y, and Millennials did not have the capacity to contemplate business ownership as they were burdened by university education debts and home loan repayments, Tynan said.
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