An indication of prices as at September 2015:
|Revenue Type||Recurring Revenue multiple|
|Investment and super clients (over 75 years of age)||1.0x to 1.5x|
|Investment and super clients (65-74 years of age)||2.0x to 2.5x|
|Investment and super clients (up to 64 years of age)||2.5x to 3.0x|
|Risk clients (under 50 years of age)||3.0x to 3.7x|
|Risk clients (over 51 years of age)||2.0x to 2.5x|
|Corporate super clients||0.5x to 1.0x|
|C’s and D’s (investment ‘grandfathered’ and risk)||2.0x to 2.5x|
|Mortgage clients||2.0x to 2.5x|
|Accounting fees – business clients||0.9x to 1.4x|
|Accounting fee – individual returns||0.5x to 0.9x|
The above multiples can vary depending upon the terms offered by the vendor, geographic location of the clients, age of the clients and the investment products within the client portfolios. Multiples paid for risk books or insurance-revenue based practices will vary depending upon the client’s occupation, size of premium, type of policy (stepped or level) and geographic location of the clients. The above multiples are for high-quality risk clients.
The above table is based on market activity over the past six months to September 2015.
The multiple of recurring revenue paid for a financial planning register can vary depending upon the payment terms offered by the vendor, location of the clients, age of the clients and the type of product or platform in which the client has invested.
The multiple paid for risk books will vary depending upon the size of the sum assured, the premium and how it’s paid, the insurance company (product provider), whether the insurance is hybrid (combination of stepped and level premiums) and whether the insurance commission was paid up-front, for example, 100% up-front with a small 10% renewal trail.
The multiple paid for mortgage book trails will vary according to the size of each loan, the occupation of the borrower, whether the loans were written as variable or fixed, age of each loan and the aggregator.
The multiple paid for larger financial planning businesses has a range of four to five-and-a-half times the normalised EBIT. The price range for mortgage management businesses is three-and-a-half to four times normalised EBIT, and large accounting practices range from three-and-a-half to four-and-a-half time normalised EBIT.
Once again, multiples paid for smaller accounting businesses ($500K to $1M in fees) have risen as a result of demand being higher than it was at the time of the last survey. The highest demand for this price range comes from financial planning practices, or accountants heavily into financial planning, and who wish to bolster the opportunity to cross-sell financial services to newly-acquired tax clients.
In summary, prices paid for financial planning businesses based on profit has fallen. The opposite has occurred for accounting businesses and trail revenue connected with loan books, with both rising due to demand.
TURNING C and D PLANNING CLIENTS INTO A’s and B’s:
In June this year, Radar Results outsourced the telemarketing division of its business to a Newcastle-based company, Hot Source Marketing (HSM). HSM has a six-person team devoted to contacting Radar’s data base of 9,500 planners, accountants and mortgage brokers.
So far, the results have been brilliant, with 21 practices located that are looking to sell or merge their respective businesses, and to this point we are only 20% into the data base. In addition, all planners (over 300) who were in attendance at one of Radar’s Seller’s Workshops since 2010 when FOFA was announced, will be contacted. Planners and accountants who requested a DIY Sellers Kit in the past will be contacted discreetly, and HSM will get in touch with Radar’s 280 buyer clients to ask some key questions. Finally, 900 planners and accountants who had previously requested a Fee Appraisal from Radar Results will be telephoned.
HSM can phone your database of C’s and D’s, including orphans, and arrange meetings with those who show promise or require advice. If the orphan doesn’t have a relevant contact number, HSM can locate the most current details, such as address and phone number. Any business that doesn’t have the time to contact their C’s and D’s, or possibly can’t locate their client, should be utilising the services offered by HSM. HSM operates on an hourly rate.