Adviser exits fail to translate into business sales

Now may be the best time to sell a financial planning business but sellers should be aware it can take up to three years for them to fully exit a business.

Stephen Prendeville, founder and director at Forte Asset Solutions, said he had been in the business for 19 years and currently had the lowest level of sellers he had seen in his tenure.

This was despite the number of advisers falling to around 17,000 as thousands exited the market.

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“There is a misunderstanding about adviser exits, 9,000 advisers have left in the last three years but the vast majority of them were accountants or were salaried advisers at banks, they didn’t own any clients. There is the least amount of sales I have seen in 19 years but the highest level of demand.

“The industry has been working on the assumption that value will have crashed but prices are up to 3x recurring revenue.”

However, he warned any advisers who had planned to not sit the financial adviser exam and sell their businesses instead would be unable to achieve a sale that quickly.

“It is not like selling a house in a few weeks, it takes six to nine months to sell a business and most principals want to stay for another 12-24 months to ensure a smooth transition for clients. I would look now if you want to leave in the next two to three years.”

This left those sellers in an ideal position of being able to pick the right business for them and one that would culturally-align with their business and clients.

“It is the best sellers’ market, they have plenty of choice to pick the right buyer from and to pick with confidence that it will be the right fit for their client.”




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I just learned something new. I didn't know you could own clients. Interesting to note that it takes 3 years to exit a business you've sold that you hope to get paid 3x for. So instead of just working and owning the business for another 3 years and having control over how it's run, then walking away with say .8 but only your own risk you take the additional risk of the new buyer stuffing it up and potentially losing the whole lot. Just remember Storm Financial and the advisers that sold their businesses to them.

I'd imagine it's like a Marriage Duke. Did you meet someone that night, have sex and get married the next day? Sure you could just sell to the highest bidder, and work longer and have that purchaser sack the staff, rip the clients out out of existing products, cherry pick clients and increase fees or show them the door. However most planners I know care about their clients (and staff) and so it does take time to date, find the right party, hand over clients and finally leave. After all, we're in the relationship business.

Interesting observation re the 3 year exit process Duke. Preparing for sale also involves a truck load of additional work getting files and systems into the preferred state of a potential acquirer. Handover periods can require becoming an employee in someone else's business after years of running your own show.

Makes you wonder if retirement for self employed advisers is best managed by gradually letting go of least desirable clients, reducing hours, referring good clients to someone you trust with no strings attached, and eventually just walking away. It wouldn't result in much less money, and would avoid a great deal of hassle and stress.

I suspect there's quite a few on this path right now with a (FASEA inspired) target exit date of 31 Dec 2025.

Spot on Anon, my point entirely. It can be done ethically and respectfully with a lot less risk.

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