May 2020 Newsletter

The main impact to the value of financial planning practices is from the Royal Commission Report released in Feb 2019 and the additional red tape that followed the recommendations. The banning of grandfathered trail commissions from Jan 2021 has had an immediate impact with as much as 25% of the recurring revenue from some practices disappearing. The strategy of moving these grandfathered clients to a fixed fee type client can be time-consuming and problematic, but not impossible.

The Corona Virus has not seen any substantial change in valuation multiples, whether it’s a multiple of normalised EBIT or recurring revenue. The share market crash of Feb-April 2020 has seen values diminish where the fees are connected to the Funds Under Management (FUM). Some practice revenues are down between 5% and 20% depending on the client’s exposure level to shares. 

Radar Results consultants around Australia have reported that price multiples being paid for financial planning practices have softened due to the attitude of buyers in the current environment.

Another factor that has lowered planning practices values is the number of sellers compared to buyers. It’s a buyers market and has been that way now for about 18 months. There have been thousands of planners either sacked, told to move to another licensee or given a Buyer Of Last Resort (BOLR). Further, many don’t wish to do the FASEA exam, and certainly, they don’t want to commence a 4-year University course. With the average age of planners estimated to be 60 years or over and started their careers and businesses 25 to 35 years ago, many have had enough and wish to either retire or have a sea-change.

What’s in demand

Accounting practices are in significant demand, and prices remain steady.

SMSF administration fees are now selling for around $1.50 per $1.00.

General insurance registers or businesses are also hard to find for our buyers.

Radar Results has moved up the price paid for home loan books. Like accounting businesses, Radar Results do not have enough loan books to sell.

Revenue Type Recurring Revenue Multiple
Investment and super clients (aged 80 yrs+) 0.8x to 1.0x


Previously 1.0x to 1.2x

Investment and super clients (aged 65 -79 yrs) 1.7x to 2.2x


Previously 1.8x to 2.3x

Investment and super clients (aged up to 64 yrs) 2.2x to 2.7x


Previously 2.3x to 2.8x

Risk clients (under 55 yrs) 2.2x to 2.7x


Previously 2.3x to 2.8x

Risk clients (aged 55 – 60 yrs) 2.0x to 2.3x
Risk clients (aged 61 yrs+) 1.0x to 1.5x
Corporate super plans – commission switched off Negotiable
Grandfathered investment trail commissions Nil


Previously Nil to 1.0x

Mortgage clients – home loan trails 1.8x to 2.5x


Previously 1.8 to 2.2x

Accounting fees – business clients 0.75 x to 1.2x
Accounting fees – individual returns 0.5x to 0.9x

The above multiples can vary depending on the terms offered by the vendor, geographic location of the client, age of the client and the investment products within the client’s portfolio. Multiples paid for risk books or insurance revenue-based practices will vary depending on the client’s occupation, size of premium, type of policy (stepped or level) and geographic location of the client. The multiples displayed above are for high-quality risk clients.

The table above is based on market activity over the past eight months to May 2020.

Grandfathered trail commission clients (Down another 33%)

Grandfathered trail commission clients (Down another 33%)

Radar Results (Radar) had seen recent sale transactions of grandfathered trail commission clients trade between 1.5x and 2.0x the annual trail amount, but now that the Royal Commission has recommended trails cease on 1 Jan 2021, Radar Results believe the multiple has now fallen further.

These books are most likely to trade between 1.0 times and 1.5 times trails, giving buyers approximately 22 months of income. Previously these had been selling for as high as 3 times trail, but more commonly at a high of 2.7 times trail during the period 2013-2017. In 2013 these trail commissions books were sought after because no FDS (Fee Disclosure Statement) was required and the Opt-in requirement for new clients from 1 July 2013, didn’t apply. Radar Results expect a lot of grandfathered books to now come onto the market for sale.

The Royal Commission may not have explained the reasoning behind the recommended cessation of the trail commission, except to say it’s conflicted. They also feel that the financial planners have been receiving revenue without providing a service. Whilst in many situations this is correct, it’s not the situation across the industry. The Royal Commission would like the financial planners who own grandfathered clients, to make contact where possible, and try and convert them into fee-paying clients. If the grandfathered client is receiving a service already, then the trail commission needs to be changed to a fee, paid by the client and not by the product provider.

The principal of Radar Results, John Birt said, “I feel sorry for those planners who had borrowed money over the past 5 years to specifically buy grandfathered trail commission clients, thinking they would have an income for life.”

Radar Results was told that banks are not placing any value on these grandfathered clients now; basically, they do not see them as an asset. Radar Results does not hold this view, as with some effort, clients can be moved to fee paying.

New Associate for Sydney & ACT – Susannah Hart

Radar Results has helped many financial planning practices to sell their businesses over the past 12 years. Susannah Hart has been invited to join our team to further service the Sydney and ACT market.

Susannah had been in the financial services’ industry for over 25 years with her second career starting in an Accountant’s office, then transitioning the Accountants into Financial Planning.  A RetireInvest Franchise owner and Authorised Representative, she later moved into the corporate arena as a BDM, then as State Manager with Centrepoint Alliance (previously PIS), Business Growth Manager for the MLC Dealer Groups (Garvan, Godfrey Pembroke, Apogee, Meriton, NAB FP) and more recently, Count Financial Group’s National Development Manager.

Radar Results owner and Principal, John Birt, believes that Susannah’s experience and connections will assist buyers and sellers along their respective journeys.

John Birt, Principal of Radar Results, believes that the next two years will be very active, with many financial planners considering the sale of their business in the short term. According to Birt, “Advisers are definitely looking to sell before the new educational requirements force them out of the industry, and the abolishment of grandfathered commissions is likely to speed this up.”

Highest Prices Ever


According to then Prime Minister Paul Keating, the last recession we had was ‘the one that we had to have’. During this recession, interest rates rose to 18%, loan delinquency rates hit 12% and unemployment levels hit nearly 11%.

Expectations are that we are in for another bumpy ride next year. While I’m not sure if the recession of the 90’s will be repeated, property prices are tipped to suffer.

With respect to investing, overseas fund managers have Australia on a ‘no-go list’, meaning home and apartment prices are the highest in the world when compared to our incomes. Bar New

South Wales, every state has an over-supply of dwellings, with an additional 200,000 dwellings to be completed over the coming year, and 217,000 the year after. This oversupply and failed settlements could lead to apartment prices falling by 20%. Developers need to sell the unsold stock to meet their debt obligations.

Many financial planning practices have been advising their clients to buy property, particularly within their Self-Managed Super Fund. What effect would property prices moving down 20% have on the client’s overall financial situation, and would the client have a case against the planner’s AFSL or licensee? How will a recession impact financial planners, the financial industry and more importantly their clients? Being heavily geared into just one asset class, rising interest rates, higher unemployment and lower property prices are a deadly mix. 


Today, prices being offered for these businesses or client registers are the highest they have been in eight years. This is primarily due to the low interest borrowing rates and finance being plentiful. AMP has just changed their Buyer of Last Resort (BOLR) formula, now placing non-AMP products in the same category for valuation as AMP products. I believe this applies to the Charter and Hillross practices as well.

AMP Bank is offering their financial planners loans to expand, some at interest rates of 7% fixed, principal and interest over 10 years, and preferably they’re being encouraged to buy non-AMP practices or client registers, and move them into the AMP practice. Once again, this includes Hillross and Charter. This high demand by AMP linked advisers is forcing up the prices paid for financial planning activities.


Another factor that has forced up prices being paid for financial planning practices is the internal need by licensees to retain their own advisers, otherwise known as ‘baby-sitting’. Some medium-to-large licensees have offered to buy the practice themselves, as a temporary hold until they can find another adviser to join their group, and then on-sell it. The existing clients and associated revenue is retained.


In the past three years, loan book prices have nearly doubled, with some now selling for between two and three times the trail. Some mortgage brokers have sold their trail books for over three times the trail, however, in these situations there’s a correlation between the aggregator and the loan broker, with the most sought after loan books being aligned to aggregators in PLAN, FAST, Connective, AFG and Choice. Cross-selling opportunities is the main reason for this price rise, along with low supply. So far this year, clients of Radar Results have purchased fewer than 10 trail books, but if I had 100 trail books, our clients would’ve purchased them all. Financial planners really want to buy loan books as well, and tend to outbid the mortgage brokers.[layerslider id=”1″]


Accounting practices haven’t seen the same demand for their practices as financial planners and loan brokers have seen for their businesses. Many accounting practitioners, whether a sole practitioner or partnership, seem to have higher levels of business costs, such as salaries, and cannot pass the full effect onto their clients. These days, taxation clients are more demanding, more selective with the services they require and more critical of the value for money concept.

Accountants need to do more than just lodge tax returns. Many are under- charging, which I feel is a confidence issue. Accountants that provide advice, administration and compliance work to their SMSF clients are either over-charging by an exorbitant amount or in many situations not charging enough. The gap is enormous, with $895 per annum to do the full year’s work for a SMSF, and $8,000 per annum to do basically the same work.

Prices paid for individual tax return clients, commonly called ‘I returns’, have fallen. The main steadier for accounting practice prices is the demand by financial planners looking to reach a large number of prospects to sell loan/s, planning services, SMSF set-up and advice, along with risk insurance products.