Gearing levels growing among advice firms

25 March 2009

Advice firm principals are increasingly gearing their businesses, many for the first time, to appease financiers and support their financial arrangements, according to specialist advice firm broker Kenyon Prendeville.

The broker said it has experienced a "significant increase” in requests for valuations from advice firm principals.

In its latest newsletter, Kenyon Prendeville said while Storm Financial has been “making headlines for all the wrong reasons, there is also an untold tale” of gearing among advice firms and dealer groups.

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This tale involves advice firms having to gear their businesses to “appease nervous financiers and to support their current financial arrangements”.

At the height of the bull market, many business owners significantly leveraged their personal position in a number of ways, such as property development, new start-up enterprises, and substantial investment in personnel and offices.

“However, these strategies are now at risk given substantially reduced free cash flow and financial commitments made in better times,” the broker said.

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