Longer life expectancies making older clients more attractive
Financial planning practices will older client-bases are becoming increasingly popular with buyers looking to take advantage of low prices and increasing life expectancies, a report reveals.
Data from business brokerage, Radar Results, found that planners looking to buy a practice were increasingly turning to businesses with older investment and insurance-based client, where sellers had "heavily discounted" the multiple of recurring revenue for investment clients over 75-years old.
Radar Results principal, John Brit, the firm had adjusted it age category from 75 years to 80 years and above to reflect the growing interest in practices with older client-bases, with practices with investment and superannuation clients age 65 to 79 years, selling for two to 2.5 times their recurring revenue.
"There has been a trend to buy now at these attractive rates," he said.
"As the life expectancy of an 80-year-old female is now 10 year, and eight year of a male, there is real value in these ‘older' clients.
"Similarly, with risk insurance clients… buyers are no longer concerned if risk clients purchased are over the age of 50, or 55 for that matter, as the likelihood of the policies remaining in force to the age of 65 is now higher due to people retiring at a later stage in life."
Brit said the firm's latest six-month report showed that prices being paid for larger planning businesses had returned to levels not seen since before the global financial crisis.
"The multiple paid for larger financial planning businesses has a price range of four to six times the normalised earnings before interest and tax (EBIT), up from 5.5 times as the maximum rate," he said.
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