Buyers keep an eye on client sentiment

Buyers of financial planning practices remain cautious of businesses that have had exposure to failed investment schemes, according to Centurion Market Makers.

Centurion principal Chris Wrightson said buyers remained hesitant of any practice that had exposure to failed products. He added that and one of the early questions asked of a practice in the new environment was whether it had exposure to failed agribusiness schemes. While revenues were a concern, the main reason for caution was the poor sentiment of the clients, Wrightson said.

“The buyers can only talk to the clients after a sale,” he said. “The clients may still be there but they may not be happy.”

Wrightson said that buyers would rather take on 300 happy clients than find out after the fact that 100 of those that bought into agribusiness schemes were bitterly unhappy. Added to this was their anger on finding out that the financial adviser that had recommended the products had sold the practice and the client now had to deal with someone they did not know.

Fortunately it appeared that not too many practices coming onto the market had a large exposure to these products, Wrightson said, adding: “Businesses with a large exposure to agribusiness schemes are among a small percentage.”

Referring to the pressures on buyers, Wrightson said funding remained a top concern. He said financial planning practices had become a different proposition for the banks as realising revenues had become less certain.

“The banks are being a little more cautious; they are being more meticulous,” he said, adding that although they were providing funding the process was much slower.