Lack of adviser businesses up for sale

The adviser exodus is failing to translate into businesses up for sale as firms seek acquisition opportunities.

John McIlroy, executive director at Crystal Wealth Partners in Sydney, said the firm had been looking at acquisition opportunities but there were few available businesses out there.

This surprised him, he said, as there were many people who were choosing not to take, or had failed, the Financial Adviser Standards and Ethics Authority (FASEA) exams and may be unable to trade in 2022. According to FASEA, there were 1,727 advisers who had failed the exam once and not passed.

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McIlroy said: “We are getting good organic growth coming from referrals but have been looking for merger and acquisition opportunities for compatible businesses. We were looking at some last year but they didn’t go ahead.

“With the exodus of advisers we are seeing, you would have expected there were businesses out there up for sale. Lots of people haven’t passed the exam yet and it is hard to figure out what they will do next year.

“These people who don’t want to meet the requirements, what do they think will happen, do they think the Government will change its mind?”

Looking at latest figures from the Financial Advisers Register (FAR), 112 advisers exited the market in the week ended 25 June. 

He said Crystal had managed to emerge from the pandemic in good shape by picking up new clients who were seeking advice in light of the record low interest rates. Earlier this week, Natixis IM said clients were more likely to need advice in the near future if they wished to keep achieving double-digit returns in a post-COVID environment.

“We are in a better position now than we were before COVID-19, investment returns were OK and we picked up new clients as interest rates dropped to 0.1%. People also had time to focus on their personal circumstances,” McIlroy said.

“We had to educate clients though on their likely returns depending on how much risk they were willing to take. If they aren’t willing to take risk, they are unlikely to get 10% returns. On the other hand, we’ve had some clients who were taking more risk than they needed.”




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The advisers leaving have unsaleable businesses. In fact they are not businesses, mostly sole operators with a client list. Yes Crystal we get out you are in the market to buy. Nice PR jon.

I'll suggest these are mostly client bases being run by advisers who don't stand a chance of meeting annual opt in with their current setup, never mind the FASEA and Grad Dip requirements. And let's be realistic, if you know your business is in such a shape, you'll be lucky to be offered .8 at a stretch, so might as well see it out, drop your pen and walk away. The people losing here are the clients, who will join the growing number of orphans waiting to be picked up by "general advice". All things being equal though, it's a free market governed by supply and demand.

It's easy to be dismissive of those choosing to leave, they won't all be bad advisers, they will have been assisting their clients with positive outcomes for the client by and large and many clients will be distressed and rudderless even if the advice they received was adequate, if not great advice.

Many of these clients will likely not be picked up by the remaining advisers as they will not be able to afford the fee regime this industry is cursed with due to regulatory incompetence.

This is an all round disaster, incomes lost, clients without support and encouragement to be partially or fully independent in retirement, increased burden on the public purse. None of these outcomes are good yet Hayne, HUME et al and ASIC think they are doing a great job and are wonderful servants for the country. The deluded idiots.

Meanwhile Labor sits in the background seeing the reality of the future. All Australians, except the very wealthy, are herded like cattle into a corral in front of a meat works for the industry funds and the union movement to feast on.

That seems to be the current situation I agree.
The Liberal Party is doing such a great job, advised by Treasury and ASIC, that Labor can just watch - they ight even say thanks.

If the advisers can't pass the exam, how do you think they went with delivering an fds and roa every year since 2013? Especially since ASIC only required an roa as a retrospective definition of what ongoing service means. Do they sell their book for 2x, and risk a full on look back style audit which could cost far more? Or just roll on for another 6 months, plus possibly another 9 months extension, then close the doors and quietly walk away. I'd say for many, the latter option is more sensible. So those hoping to sweep in and mop up distressed businesses like a pack of vultures will be sorely disappointed.

It's not rocket science... those that are leaving now are the ones that were never really going to be around in the future. The real opportunity will come in two years when the educational standards timeline ends.

I know of a number of business owners that have taken the FASEA exam just to buy themselves another couple of years until they sell... not great business sense given they'll have their backs up against it... but hey, it's always been said that a great financial planner and a great business owner doesn't always go hand in hand!!

"but hey, it's always been said that a great financial planner and a great business owner doesn't always go hand in hand!!". Never a truer response has been posted on this website!

when the very best, most educated advisers leave the industry in droves, the market shrinks.

Are they doing that though? If they cant pass a simple exam (as badly constructed as it is), then they certainly aren't going to be missed... Let alone the 'very best'.

I don't agree, I passed the exam on first attempt. It in NO WAY does this make me a better adviser and will not in a month of Sundays help my clients receive better advice. I do care alot about my clients and remain committed to making their lives better however this BS of the exam and the ethics course adds cost and distraction that in no way benefits my clients.

This whole process is nothing but a political sham to demonstrate something is being done to those that have no idea (eg Hayne) but in the end drives out good people, who care alot about their clients and does this country a MASSIVE disservice by politicians and bureaucratic fwits who have never worked a proper day in their life, never paid a BAS or PAYG statement and whose entire remuneration is made by being a parasite on the rest of the Australian economy.

Buddy ole pal

You really think advisers are leaving because they aren’t passing the silly exam?

The ones that are leaving are the ones who have already passed the Fasea exam AND already possess a Fasea degree over a 1,000 so far of these types of advisers have exited with a further 5k expected by the end of the year. These are people who already have one or more Fasea approved degree or relevant degree.

It’s the very best that are leaving first and it spells doom for the industry.

Just watch what happens by the end of the year KABOOM!

Yes, the best are leaving. This includes advisers in their late 30's with 15+ years experience, that were in the first tranche to sit and pass the exam (and ethics subject) and who already held FASEA approved degree(s). Those with options use those options.

The reality is organic growth is being stifled by the increased compliance cost and onboarding cost for new clients. The default position of licensees when presented with this problem is merge or acquire. Within my business we have more than enough referrals but are striking a point of capacity issues where we have to make a decision to onboard another planner at extraordinary cost and risk or acquire another business.

Our industry has yet to develop a scaleable role that allows for the organic growth of advice businesses. It comes as no surprise that there are fewer businesses for sale because most medium size businesses are snapping them up to support there own growth as its a much easier option than training a junior, supervision, professional year. Its an issue that seriously needs to be addressed

I'm surprised that people are surprised that there isn't much for sale.
Yes, there will be significantly less advisers, but there is going to be exponentially less clients as everybody dumps lower net wealth clients as they are not commercially viable.

Businesses with HNW clients that are profitable (which would be the type of businesses that people would be looking to purchase) are unlikely to be the ones leaving.

what a crock. Most advisers leaving care about their clients, and have gone out and found practices themselves, or with Licensee help to buy their clients. I wouldn't leave my clients to a vulture on the open market...

Amen

Perhaps Crystal are failing to get deals over the line because they aren’t being commercial, or respectful to the vendor. Toss multiples in the bin - they are a worthless metric. For example
I’d pay 3-4x for highly engaged HNW clients with some upside growth and discount down insurance. Yet I have friends in the industry who are expert risk advisers that would argue the opposite.

An acquisition needs to be looked at from a discounted / free cash flow perspective. I feel like Crystal might be low-balling and missing out. We are still paying 2.2-2.5x for quality.

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