Practices for sale hit historic lows

The number of financial planning practices for sale in Sydney and Perth has declined to historic lows as a result of practice sales peaking in 2010 and planners choosing to face Future of Financial Advice (FOFA) changes instead of moving out of the profession. 

The number of practices for sale in the two cities is at its lowest since 2007, according to Radar Results principal John Birt, who said his group has been unable to find practices for sale despite demand from a dozen buyers in Sydney and 10 buyers in Perth. 

Birt said Radar Results associates have been in contact with practice brokers in the two states, and while regional supply is steady there are no practices for sale in the metro areas. 

“There was a lot of supply in 2012, and from the GFC onwards it peaked in 2010 with about 120 practices for sale nationally. Last year it had dropped to 50 to 60, with this year coming in at practically nothing,” Birt said. 

Birt says his business has never seen such a situation and that prices have been skewed, with those practices currently available asking unreasonable prices.  

According to Birt, prices have been driven up past the three-times recurring revenue price point, with larger planning groups lending heavily to planners who are seeking to expand their businesses through acquisition. 

“We had expected prices to fall ahead of FOFA but this kind of deep-pocket lending has seen the opposite take place, particularly in Sydney where prices are too high and practices become difficult to market to buyers,” Birt said. 

“Sales related to older advisers selling also peaked in 2011/12, but planners jumping ship ahead of FOFA have not taken place as many expected and we have actually seen interest in practices buying in ahead of the FOFA start date.”