Financial planning practice values stabilise: Radar Results
Future of Financial Advice (FOFA) reforms have not had as great a negative impact on financial planning practice valuations as anticipated, according to financial planning consultancy firm Radar Results.
Although valuations have been trending down since the onset of the global financial crisis the impact of FOFA has been less than expected due to the Government's watering down of reforms, according to Radar Results principal John Birt.
Some financial planning practice principals have suggested that the valuations of financial planning businesses or client registers may even increase from now on, possibly due to the effects of grandfathering, but it is hard to see how as grandfathering has always been in place, Birt said.
There remains an expectation among those looking to sell that practices will receive three times recurring revenue, but this is totally unrealistic, according to Birt.
Each business is different and will consequently earn a different price, but on average valuations have trended down to around 2.5 times recurring revenue and levelled off, he said. While a year or two ago it was rare for a practice to go for less than three times recurring revenue, now it is rare for one to go for more than that, he added.
There had been no significant change in valuations in the last six months as the Government has announced concessions to the FOFA package, he said.
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