Conditions right for planners to sell
Financial planners looking to sell their business may find themselves in a ‘perfect storm' of conditions that allow them to sell at a high price, even if they have yet to transition to a full fee for service practice according to Radar Results Principal John Birt.
Birt said that recent media coverage and parliamentary inquiries has placed the spotlight on financial planners and the calls for higher education standards will mean that planners who do not wish to undertake further training will have to retire or find a new profession.
He also stated that the shift to fee for service away from commissions will reduce the value of many planning businesses as valuations shift from recurring revenue multiples to 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," Birt said.
Access to business finance had also kept sales ticking over according to Birt who said that nearly three-quarters of his clients require finance to buy a business or book of clients and that at present it was readily available from banks and business lenders.
He said demand from buyers was still high with Radar Results currently working with 200 financial planning and accountancy clients looking to buy businesses with budgets ranging from hundreds of thousands into tens of millions.
However hurdles still remain in the smooth transition to selling a business with Birt stating that while many planners wish to sell many are not ready to do so
"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 70s and 80s 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," Birt said.
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