Deal breakers of a financial planning business sale

Radar Results has identified some of the most common and not so obvious deal breakers when selling a financial planning business.

Principal John Birt said price and terms might not be the key criterion for ensuring a successful deal, as not so obvious hurdles might present themselves in the process.

Various issues to consider include keeping the dealership satisfied should the seller be an authorised representative of an Australian Financial Services Licensee. Birt said the dealership might have concerns about the compliance record of the vendor’s business or might not like some of the products they have been selling, for example. He added that sellers might present a hurdle themselves by demanding that the vendor join their dealership.

Less obvious deal breakers, Birt said, included where ownership for the clients lies should the practice be run by a company, and this matter needed to be confirmed.

“Are they owned by the adviser, the private company or some other entity, usually a trust?” Birt asked. “If the clients are owned by a company, do you want the buyer to acquire the company shares, effectively taking over the company and its responsibilities? Usually the buyer’s answer is no, so the deal stops immediately.”

Other deal breakers identified include the premises of the practice, as sellers might wish for the new owner to take on their lease. However, Birt said the vendor might only want the client’s revenue to add to their bottom line.

Other issues that might jeopardise a sale include keeping staff satisfied and, should the adviser selling the business stay on for a while after the business is sold, what salary they ask for.