6 monthly valuation guide


Radar Results, M&A consultants to the financial services industry, has provided its six-monthly price guide on the value of financial planning and accounting practices. Since Radar Results lodged a Submission to Senator the Hon Arthur Sinodinos, Assistant Treasurer, regarding a decision on the issue of the grandfathering legislation and how it is inhibiting practices from moving between licensees, industry sources suggest that practice values have fallen. John Birt, Principal for Radar Results, states “Valuations have remained stable; but the effect is that since July this year many sale transactions have stalled”.


An indication of prices as at November 2013:

Revenue Type

Multiple of Recurring Revenue

Investment clients 65yrs+

2.3x to 2.7x

Investment clients age 35-64yrs

2.7x to 3.0x

Risk clients (average age under 50 years)

3.0x to 3.8x

Corporate super clients (down from 0.8x to1.3x)

0.5x to 1.0x

Cs and Ds (investment and risk)

1.5x to 2.5x

General insurance

1.5. to 2.0x

Mortgage clients (up from 1.2x to 1.7x)

1.5x to 1.9x

Accounting fees (lower end fees up from 0.65x, top end down from 1.4x)

0.80x to 1.2x

The multiples above can vary depending on the terms offered by the vendor; actual location of the clients; client ages; and the particular investment products recommended. In relation to multiples paid for risk books, or insurance-revenue based practices, the client’s occupation, premium size, policy type and insurance companies used, are all critical. The multiples displayed above are for high-quality risk clients.

The table above is based on market activity for the last 6 months to 31 October 2013. The multiples above can vary depending on terms offered by the vendor, actual location of the clients, client ages and the recommended investment products.

Change in the price range since April 2013 has been evident in three sectors. The number of corporate super clients selling multiples has again fallen, due to the Government’s MySuper product being likely to ‘take over’ in the next few years; the number of mortgage clients has increased due to the demand for this style of client and trail revenue, with cross-selling opportunities being the main driver; and accounting fees have risen on the back of buyers’ demand. Once again, cross-selling opportunities with accounting clients, along with the ability to offer a ‘one stop shop’, are the drivers here. When a practice which is selling has a total revenue of at least $1M, an EBIT multiple may be applied to its valuation rather than a multiple of recurring revenue. Interestingly, concerns around FOFA have not lowered valuation multiples; if anything, in some states such as WA, VIC and NSW, they have increased. EBIT multiples have remained steady since FOFA was introduced and can vary from 4 times to 6.5 times, depending on the practice. More commonly, an EBIT range is between 4.5 times and 6 times.


What’s called ‘chopping up a book’ can often give the seller more money. Radar Results has many clients around Australia who would love to acquire part of a business. Chopping up books has become popular with sellers who find their business is too large to sell easily. Instead of waiting months, or even years, to find a buyer who wants a large business, sections of the book, like the mortgage loan trails, can be on-sold easily and quickly; allowing risk clients, investments clients and even accounting clients to be separately offered to different buyers. Generally the purchaser is likely to pay the seller a higher price for the individual sections because their appetite has been satisfied.

FOFA Causes Havoc


Radar Results, M&A consultants to the financial planning industry, recommend you visit their stand at this year’s annual FPA Conference to be held in Sydney. From 17 October to 18 October you can have access to Radar’s expert consultants in the area of practice valuations, advice on buying a financial planning business or if you wish to sell, what to do. Not only can the Radar consultants provide advice on financial planning businesses, but also on accounting practices, mortgage businesses, SMSF client registers and risk books.


FOFA was introduced to give more Australians better advice at a lower cost. Some aspects of FOFA are doing the opposite; stopping planners from moving some clients from a commission system to a fee arrangement, basically to save the planner from more ‘paperwork’ and responsibility.

An annual Fee Disclosure Statement (FDS) now needs to be sent out to all clients who pay the planner a fee. The FDS must state what services were provided over the past year and at what fee level, plus what services will be provided next year and at what fee level.

A long serving planner recently suggested that a fee of $1,700 ‘sounds about Older man stressedright’ as a fee for an annual review. When quizzed on how he arrived at that amount, he said “Well, they have about $300,000 in FUM; what do you think John”.  I replied “I think it should be based on what value you have delivered, and plan to deliver in the next 12 months.”  I asked what the planner did for the client now “nothing, unless they call me and ask for a review” answered the planner. This is not an uncommon occurrence.

It would be good if planners could measure what it costs to look after that client for the year, and then going forward, determine a fee based on costs. I know it sounds difficult and complex, but for most of the 90’s that’s exactly what went on with accounting firms I worked with.


Radar Results, M&A consultants to the financial planning industry, recommend the use of specialist lawyers who have experience with financial planning transactions. Principal for Radar Results, John Birt, stated that he had seen many Lawyer symbolsales either stumble or drag out or just fail because lawyers involved in the deal were not experienced. Birt said, “We have developed a panel of lawyers on our website; they’re specialists who are very experienced.” He continued “It’s got to the stage that if a financial planner approached Radar Results to sell their business, and if they didn’t want to use a ‘panel lawyer,’ you’d have to think that there would be problems.” To review a panel lawyer in your city, simply go to our website to order your own DIY Sellers Kit.


Associates for Radar Results have reported that the number of financial planning practices for sale in Sydney and Perth has dried up. Compared to some other states, particularly Queensland, the number of practices for sale is the lowest it has been since 2007. Unfortunately for buyers in these particular cities, the supply and demand curve may force up prices.


There are many definitions of an orphan client, a D grade client and a C grade client.

Measures have been taken to recover lost superannuation accounts and from July 1st money down drain2013, accounts of those members with up to $2,000 who have been unable to be contacted will be transferred to the ATO, with interest to be paid at a rate equivalent to Consumer Price Index inflation. This limit of $2,000 is expected to rise to $3,000 in 2014 and may eventually be limitless. These measures may reduce the sale value of ‘lost members’, which is already at an all-time low.

Historically Radar Results has always received requests wanting to buy as many clients as possible, the smaller the revenue-per-client the better. This trend may well be ending, especially with FOFA and fee-for-service set to dominate in the future.

Valuation guide for your practice

Radar Results has produced its 6 monthly Valuation Guide for those practices and client registers sold since May 2012. The most notable change has been the surge in demand for accounting practices, notably those that do not already offer financial planning services. The opportunity for financial planners to acquire an accounting practice and then market their services to the tax clients is considered extremely desirable. Their services may include loans, estate planning, general insurance and financial advice. This higher demand has, in some circumstances, forced the ‘usual’ multiple above $1.00 for each $1.00 of tax fees. The demand for tax-fee client bases is mainly in the capital cities, whereas demand is less in the country and regional areas.

An indication of prices as at Nov 2012

Revenue Type

Multiple of Recurring Revenue

Investment clients 65yrs+

2.3x to 2.7x

Accumulator investment clients

2.7x to 3x

Risk clients (average age under 50 years)

3x to 3.8x

Corporate super clients

1.0x to 1.5x

Cs and Ds (inv and risk)

1.5x to 2.3x

General insurance

1.5. to 2.0x

Mortgage clients

1.5x to 2.0x

Accounting fees

0.65x to 1.4x

Demand for risk businesses
Demand for risk businesses is as high as ever, particularly since FOFA has basically left this sector alone. Prices paid for good-quality risk businesses in Australia haven’t really changed in three years. They rose substantially during the end of the GFC in 2008 and have clearly held their position as the most sought-after financial-services business. Before you formulate your selling price, aspects such as the client’s age, type of policy, renewal-commission percentage and servicing levels need to be taken into account. A higher multiple is paid for quality clients who have a professional occupation and who pay high premiums due to the higher sums insured.
Demand high for ‘larger’ financial planning practices

Inquiries to Radar Results this year for the acquisition of larger financial-planning practices have increased. When asked ‘what’s considered as larger’, the reply would be ‘at least $2M of recurring revenue’. Boutique planning practices have grown substantially since the GFC through their continued acquisitions; and they are now after ‘larger’ acquisitions.

Recurring revenue (RR) definition confusing Any financial planner who’s looking to sell their client register or business should first agree with the purchaser on what the actual recurring revenue (RR) they are selling is. Whilst there’s no hard-and-fast rule, Radar Results has, for many years now, advised that volume bonuses and commission on regular contributions to superannuation policies should not be included in the definition of recurring revenue.

We even find that sometimes the seller has included GST in their RR figure and, in some instances, neglected to add back the licensee’s service fee. This may change the RR figure by up to 20%. If you are thinking of selling your financial planning business, you may benefit from asking a Radar Results’ consultant for advice before you go to market.

Practices that have been sold in the past on a payment-instalment method, and where the second or third payments are yet to be received, may be affected by the ban on volume bonus. If the revenue previously included a volume payment, then the future instalment payments by the purchaser to the seller may be lower than would have been expected.