Deal breakers when selling your financial planning business

If you’re planning to sell your financial planning business you’ll need to be aware of some obvious and not so obvious deal breakers.  Besides price and terms being the obvious ones, there are some surprises in store for the unwary seller.
If you’re an Authorised Representative of an AFSL and looking to sell, Radar has had buyers come back saying “my dealership is not happy with the compliance of the vendor’s business” or “my dealer doesn’t like the products they’ve been using”.  A seller may impose a deal breaker themselves such as “I’m happy to sell but you must join my dealership”.  Another deal breaker isolated to a vendor’s business that has multiple partnersNegotiate would be the requirement to buy-out one of the partners. This can stop many buyers from getting past first base.

Consultants like Radar Results can introduce sellers to a matched buyer; matched on location, price, terms and business style. Radar may then be able to also arrange an indicative finance approval to see if the buyer qualifies before moving too far into the transaction. Radar also canvasses and identifies trouble spots in a transaction well before they appear.

But there are the less obvious deal breakers If your business is run by a company then the ownership of the clients need to be confirmed.  Are they owned by the adviser, the private company or some other entity, usually a trust?  If the clients are owned by a company, do you want the buyer to acquire the company shares, effectively taking over the company and its responsibilities? Usually the buyer’s answer is no, so the deal stops immediately.
Another deal breaker could be the lease on the vendor’s office. The seller may want the new owner to take on this lease, thus keeping the clients going to the same location, enhancing client Negotiateretention and passing on the cost to the buyer. Not a problem if the buyer needs an office; likes your office and feels there’s a commercial advantage in taking on the lease. However, often buyers already have their own office and only require your client’s revenue to add to their bottom line. Buying the clients is one thing, taking on a lease is quite another. This can be an instant deal breaker.
Staffing is another possible deal breaker. Often a mature business looking to expand already has adequate staff. The vendor’s push for existing staff or family members working in the business “to go with the business” can be a deal breaker. As well, the retiring adviser may want a salary for several years after signing the contract and depending on how much they ask for, and for how long, can jeopardize the sale. I’ve seen qualified experienced planners ask for as low as $60,000pa and up to $250,000pa.
Within the terms of a sale, a claw-back or rise and fall clause can be negotiated.  A sale without any claw-back provision can cause a buyer to shun the deal day one. Transition of the client relationship to the new owner is usually required by the buyer, and if this is not being offered, the transaction may never start.
As you can see, there’s a lot of information and questions that need to be answered upfront to save time and effort from both the buyer and the seller – and these questions are not always obvious.

New Registered Valuation Service

Radar now provides a professional valuation service by a Registered Valuer who’s on the panel of major banks.  Adviser feedback to Radar indicates fees of between $5000 and $7000 are being charged to value a planner’s business and as the value of the firm increases, so does this fee.  Radar has a flat fee of only $2950 plus GST irrespective of the practice’s value.
CalculatorRadar Results will provide a registered valuer’s report for a flat fee of $2950 plus GST for any financial planning business, pure insurance/risk business, mortgage business, accounting practice or any combination thereof.  The valuation can be finalized within a few days if the seller provides timely and comprehensive information to Radar.
Radar’s valuation service provides a substantial saving; at least 40% lower when compared to current industry prices.  This benefits the planning industry as a whole, making a bank approved registered valuation much more affordable for planners.  Click on this link Registered Valuation Questionnaire and complete the questionnaire to register your interest in receiving a valuation of your practice. 

Free Information Memorandum and Appraisal

Radar Resutls also provides a free Appraisal and Information Memeorandum (IM) preparation service for sellers.  Often accountants and brokers will charge up to $4000 for an IM to be prepared.Phone
To privately discuss our fee IM or Appraisal service just click on Confidential Phone Enquiry or phone me on 02 4384 5470 or contact one of our five national offices.
For more information on Radar’s services please go to our website.

1 in 4 Valuations Lead to a Sale

sell/buyThe number of financial planners who have approached Radar Results wanting to sell their business has increased by 50% from January 2009. We had 42 practices for sale in January and now have 63 serious sellers. Based on fee revenue and purchase numbers, the last quarter (July to September) was Radar’s best ever result.
Michele Conroy, Operations Manager and part owner of Radar Results expects nearly 100 practices to be purchased by Radar clients during 2010. Michele said “that’s about 20 practices per office per year, not allowing for the new office that will shortly open in Perth.”
The number of valuations provided to the financial planning industry by Radar Results has been lower than compared to the same period last year, although for the last 3 months the rate has picked up to 15 valuations per month. This is a good barometer for increased activity in the FP buying and selling sector from now till Xmas.
Since commencing business in 2005, Radar Results has prepared 319 valuations of which 118 have indicated they wish to sell in the next 1-3 years. Our records indicate that for every 4 valuations we do a sale is imminent with the transaction usually taking place within a 3 month period.
Interestingly, this year, several of our buying clients “turned around” and actually sold their financial planning business internally to another Radar client. This is somewhat rare and suggests the pressure the planning industry has been under for the past two years, effectively turning buyers in sellers.

New Sydney Office – Mosman NSW

 Introducing our New Associate – Patrick Walford

Patrick has over 10 years experience in the financial services industry in a variety of middle management, practice management and operational roles. Patrick was responsible for the support and growth of a nationalpatrick financial planning group, helping its advisors achieve their business goals. This included the development and implementation of a tailored and structured Practice Management Program.

Most recently Patrick was responsible for building a vibrant financial planning division within a multi-disciplined Sydney practice. He was also the State Manager for this leading national financial planning group.

This skill and knowledge of the planning industry will help Sydney based clients of Radar Results.
To contact Patrick Walford please call 0423 867 994 or email


Is Now the Right Time to Sell?

Every financial planner eventually wants to sell their business but sometimes they wait too long and their estate ends up contacting Radar Results. This is not the best scenario, as it tends to sell for half price. Last year our clients purchased several deceased estates, but it’s not our preferred outcome.
Let’s look at “is now the right time to sell.”Whether your reason for selling is for a seachange, age based (retirement), poor health or just financial pressures, is now the right time? Often you can benefit from making the right decision at the right time, or is that called luck. Planners who sold two years ago (before the Global Financial Crisis) would consider themselves very lucky.
The situation now from two years ago is quite different and planners need to consider the following issues:- 

  Sell sign
1.    ASIC’s recent recommendation to Government to ban all trail commissions, volume bonuses and upfront commissions on any investments including superannuation contributions. Whist it is likely that there will be a grandfathering provision to protect the current value of planning firms, over the long term planning firms may have to provide clients with an invoice similar to accounting practices and lawyers. Some potential buyers may not like this evolutionary change which may affect the future value of your practice.
2.    Finance has become a real issue of late with banks becoming reluctant to lend for acquisition of FP practices. I’m told that banks now have FP businesses ranked as the second highest risk category for lending and this may even get worse before it gets better.
3.    FP prices have fallen in both multiple and revenue. Whilst this is no surprise, prices may deteriorate further as more planning firms come onto the market.

There are other reasons why “now may be the right time to sell” but certainly the three above appear the most compelling. I’m concerned about client loyalty to the new planner (new owner) evidenced by FP clients leaving after a sale has completed. Up to 10% of FP clients over the past year have moved away from some FP practices acquired by Radar clients. Whilst there’s always this risk when you sell, after two years of double digit negative returns on superannuation, FP clients are wondering if she should wander.
Another area which may get worse is Professional Indemnity Insurance (PI). With all the class actions that are in progress and more to follow, insurers are “running away” from our industry. A Radar Results client received his renewal notice last month showing a 400% higher premium than the previous year. This was an accounting based conservative planner. With the impact of these issues on your business, you have to ask yourself what the future looks like for the planning industry and its clients. Maybe
the right time to sell is now.

6,000 Planners to go



Recent Newspaper and Finance Magazine articles suggest that banks have not changed their lending criteria. This is questionable when they are knocking back a lot more loans than previously. This year Radar Results will help around 40 clients with their finance applications to acquire a financial planning business. Matt Taylor, Radar’s Melbourne Manager, feels that bank lending practices have changed. “They [the banks] have dramatically changed to a point where they are snubbing property when offered as security. I can’t believe that an adviser putting up his home, his FP business plus the one he wants to buy, is still declined.” Institutions say that while there are enough assets, the cash flow’s not there. Right or wrong, this is a huge change in appetite from only 12 months ago and is certainly not helping the financial planning industry. The banks have a legal obligation to notify their lenders when they breach a covenant or loan condition. Radar is seeing more and more breach notices being issued with some practices having to be sold, or partly sold to repay a portion of their loan. To have your planning business valued just go to the Valuation Questionnaire Page.

Introducing our New Associate – Narelle Burke 

Narelle brings with her fifteen years of funds management, platform, practice management and financial planning experience.
Narelle’s previous roles have included four and a half years with HSBC Asset Management as their State Manager – Queensland, BusinessNarelle Development Manager roles with Great Southern Securities and Norwich Union (Now AVIVA) and administration roles within AMP in both their Head Office in Sydney and their regional office in Toowong in Brisbane.
Narelle’s most recent role has been working as the Business Development Manager in her husband’s financial planning office where they operate under their own dealers licence. As an authorised representative she has also been providing Financial Planning advice and ongoing education to clients of the practice.
Having worked closely with financial planners and accountants throughout Queensland for most of her working life, Narelle has had first hand experience assisting in the transition of businesses; before, after and during acquisition.
To contact Narelle Burke please call 07 3391 2490 – Mobile 0400 020 907 or email

 6,000 Planners to go ; down to 10,000?

There has always been debate on how many financial planners we actually have here in Australia. Some say it reached 25,000 during the 1980’s. When minimum educational requirements were introduced, it halved. Choice Magazine recently claimed we have 16,000 planners – but how many are actually practicing. Choice also claimed that the number of planners in Australia could fall to as low as 10,000 due to the poor economic times. If you are leaving the planning industry as an employee and would like to acquire a FP business or book of clients, please go to the Buying a Financial Planning Business Page.John








Recurring Revenue Multiples Update


It’s been an interesting period since Xmas with the value of financial planning (FP) firms still trending down. Any further downturn in the markets could see their values fall further. With more and more planners looking at retiring, there may be an oversupply of planning firms for sale in the next few years.

The recession has seen finance approvals for FP acquisitions difficult to secure. Although, the situation has improved recently with lower interest rates on these particular loans.

FinanceUnemployment in Australia has been increasing by half a percent (0.5%) per month and may reach 10%. Just today, the government acknowledged that double digit unemployment is likely. This is a concern for all – especially the FP industry with increased redundancies and lack of income from new business. With investor confidence at an all time low, I wonder when advisers will move back into the market? The Dow Jones is up 23% from 9 March 2009, which was only 6 weeks ago! 

With demand for financial planning firms at an all time high, Radar Results has opened another Melbourne Office. Queensland is also very busy for us with many advisers looking to expand their current FP businesses – so a Brisbane office is likely for June 2009. Also in this Newsletter we discuss recent recurring revenue multiples, how they’ve changed and how they can be applied to value your business. We compare RR multiples between regional vs city practices, platform vs retail business plus risk business vs investment business. Please call me if you have any questions or go to Radar Results Website. Obviously every business is different, so if you would like Radar Results to value your business (fee free) just fill out our online Valuation Questionnaire. Takes only 4 minutes. Please read on ….


Financial planning businesses in Australia have frequently been valued on a multiple of recurring revenue (RR), particularly when they’re offered for sale. It’s important that the buyer and seller both agree on the exact definition of RR otherwise the expected purchase price can be quite different. So agreement early needs to be reached on definition of RR to avoid conflict.Radar

Historical sale’s figures of FP businesses when compared to present day market values can be very misleading. As well, the RR multiple used for valuing a capital city client base when compared with a country/regional client base can be “miles apart”. To further complicate matters, the different RR multiples used for platform FUM revenue compared to non-platform FUM revenue can be 50% higher. The value of revenue from risk clients can also be valued differently between city and regional locations. Risk RR today can sell at a higher value than investment revenue due to demand and it’s lower volatility. In many situations, RR has increased over the past year for risk business whereas FUM revenues have declined and been volatile.

Businesses that are large enough to provide comprehensive financials can also be valued on Earnings Before Interest and Tax (EBIT) although definition of “large” can vary between a $1M business and a $10M one. Depending on the quality of the business, an EBIT of between 4 and 7 can apply.

In summary, you could apply the following multiples of recurring revenue (RR) to a business:

Regional Platform FUM RR               2.7x       
Regional Non Platform RR                2.0x
Regional Risk RR                              3.0x
CBD Platform FUM RR                       3.3x
CBD Non Platform FUM RR               2.7x
CBD Risk RR                                     3.5x –  4.0 *
 * Depending on age of clients, types of policies, insurance companies etc.

If you apply the above RR multiples to the different parts of a business based on location, platform and risk revenue – a fair valuation can be determined. C and D grade clients are in large demand and can usually fetch between 1.5x – 2.5x RR. The variation in RR depends on the seller’s ability to provide any client files (hard or soft), what is actually contained in these files, client service records, the seller’s compliance reports, payment terms, number of clients, age of clients and their location.


Introducing our New Associate – Merv Wilson

Merv has been working for over 36 years in Banking and Financial Planning and now looks after of 2nd Melbourne Office.  He spent the first 15 years in retail banking with National Australia Bank, including 9 years as a branch manager before assisting with the establishment of the bank’s financial planning arm in 1987. 

In 1994 Merv crossed to Pembroke Financial Planners, which subsequently became Godfrey Pembroke in 1995 before joining Capstone Financial MervPlanning in 2005. Merv joined Radar Results in 2008, having scaled back his involvement with Capstone.

Merv is a CFP, holds a Diploma of Financial Planning and a Bachelor of Science degree from Melbourne University.  He is a strong advocate of the “Fee for Service” approach to Financial Planning, as pioneered by Pembroke in the 1980’s.

Merv has seen both sides of buying and selling Financial Planning Businesses, having purchased the business of another Godfrey Pembroke Consultant in 2002 and is now well advanced in the succession of his Capstone business.  He believes that the single most important ingredient in a successful transition is to identify like minded sellers with buyers. Contact Merv if you would like to sell your financial planning business. Radar Results has a policy of not charging the seller.
Merv can be contacted on 0402 852 070 or







Logo Radar Results

It has been 4 months since my last Newsletter and since then markets have slipped another 20%, or even more. We now have a full year of downturn to measure past recurring revenue and EBIT values. This will help buyers and sellers of FP firms to know what their business is really worth today. You cannot use recurring revenue in the good years to strike a value on your business today – It just doesn’t work! Until we have moved back into a consistently rising market you have to draw a line in the sand and assess what a FP business is worth on today’s figures.

Many planners feel that markets will increase 20-30% from now. This coincidentally is the same thought pattern they had 12 months ago, 6 months ago and even 3 months ago. This is the theory of an eternalBrown Money optimist but unfortunately reality kicks in and the buyer of your FP business wants some protection in case markets move down further, even if you think they’re going to go up. As well, clients could leave during the transition period. A seller may like to benefit from a rising market (the optimist) so a suitable rise and fall clause can be used. Should the rise and fall clause be based on market fluctuations, client numbers or both? Sale Contracts reviewed regularly by Associates of Radar Results reveal rise and fall clauses can differ substantially so you should seek advice in this area.

Last year Radar Results provided 180 valuations for the financial planning industry. The measurement of recurring revenue now needs to be calculated before the sale and again after settlement. Sure you need to Dollar Jigsawarrive at a price for the Contract but the actual amount paid to the seller down the track can vary immensely. Recently an offer of 2.8 times recurring revenue (RR) for a FP business (based on the last 12 months RR) meant the buyer was actually paying over 4.1 times RR. You may now have to use the last 6 months annualised or the last 3 months annualised to arrive at a realistic RR value. Or, just leave it up to future income streams of the business and have a long payout period. It’s a dilemma.

Recurring revenue (RR) multiples have fallen further since September 2008 (my last Newsletter) and are now between 2x and 3x RR while EBIT multiples have steadied at between 4 to 6 times. If you would like a confidential valuation of your planning business, contact our Head Office on PH 02 4384 5670 or click on the Valuation Questionnaire Tab on the left. 

Dilemma for sellers – client loyalty and over supply?

If you didn’t sell your FP business last year, when should you sell? A year or two from now could be even a worse time to sell your FP business if by Christmas unemployment in Australia and overseas reaches 10% Selland the sharemarkets move down another 20%.

All of this unrest will really test client loyalty and retaining clients during a sale process will become more difficult this year and even more dangerous in 2010.  Changes in dealership, adviser and even changes in the office location might be just a bit too much for some clients. They may stay loyal for 1 year of unrest but maybe not for 2 or 3 years if the bad news continues. Another valid reason for selling now rather than later. The financial planning industry, as I knew it, has been decimated and it could take up to 5 or 10 years to recover. With the average age of planners nearing 60 years old, you should ask yourself “just how long do I hang on for?”

We have seen the largest downturn since the 1930’s and the winners will be those planners who are cashed up and know that they are now in a Buyer’s market. They can borrow at 5.6% (interest only) and acquire as many planning registers as they like. When could you in the past borrow at a commercial interest rate of 5.6% and acquire quality assets such as financial planning firms? Answer: Not in my lifetime.

watchThe average adviser’s age is still rising and more FP practices will come onto the market forcing prices down even further. I would suggest that in 2 -3 years from now multiples paid for recurring revenues could average below 2 times based on supply and demand.  If you would like a confidential valuation of your financial planning business just click on the Valuation Questionnaire Tab on the left.

Radar Results provide a confidential consulting service to the financial planning industry.

FPA Sponsors 2008

Radar Results sponsored last years FPA National Conference and received overwhelming feed back from planners and also from other Sponsors. We look forward to this years event and a number of our Associates attending. handshake jigsaw

AIOFP Sponsors 2008

Radar Results sponsored last years Association of Independently Owned Financial Planners (AIOFP) Conference held on the Gold Coast. E-mail me if you would like to meet a Radar Associate in your area for a private discussion about your FP business. or phone me on PH 02 4384 5670.


Lower Valuations of FP Practices

The investment market downturn for the past year has seen the value of financial planning firms reduce by up to 30%. Last year Radar Results provided 180 valuations for the financial planning industry and the impact of reduced recurring revenues and lower profitability on some firms has been dramatic. Practices with either a high level of risk product renewals or fixed dollar review contracts have weathered the downturn a lot better than pure FUM practices. Those with review fees aligned to FUM are down between 16% and 31%, even after allowing for the introduction of new business. Practices affected the most are those with “geared” clients or who have invested in products and companies that have gone “belly up”. Besides the FUM reducing, the multiples for practices has also fallen. Multiples of recurring revenue are down between 0.25-0.50x and EBIT multiples have fallen a full 1.00x.

The impact has seen some financial planners, para- planners and client admin personnel recently made redundant. New investment business seems to have reduced to a trickle and sellers approaching Radar Results for a valuation has doubled from last year.

Dilemma for sellers

The market downturn presents a huge dilemma for advisers thinking of selling their practice. With valuations now lower, some advisers feel that the market may increase during the coming year suggesting they should hold on and benefit from the possible rise. What if it doesn’t pick up and the market drops a further 20% which many experts are suggesting? What if it plateaus for 5 years? Greenspan’s comment “1 in a century event”, Foxtel commentators saying “even professional investors are fleeing” and business commentators are suggesting 5 years before recovering, doesn’t inspire confidence. With bank cash rates at 8%, a seller could take their equity today and get a guaranteed 16% increase over the next 2 years rather than further erosion of their business. Investors are asking their advisers the very same question today. It’s a real dilemma and forcing those advisers to stay working even though they’ve had enough and are suffering from health problems and stress. The average age of advisers is still increasing therefore more practices are coming onto the market. If you wish to consider selling your financial planning business just click on the link Valuation Questionnaire. Radar Results provide a confidential consulting service to our buying clients.

FPA Sponsors

Radar Results will be attending this year’s FPA National Conference from 20 November as sponsors and will have an information booth in the Trade Expo section. Associates from our Newcastle, Melbourne and Sydney offices will be attending along with principals from our Head Office. Phone me if you would like to meet me at the FPA Conference. Ph 02 4384 5670.

AIOFP Sponsors

 Radar Results are sponsors at this year’s Association of Independently Owned Financial Planners (AIOFP) Conference to be held on the Gold Coast in 2 weeks from now 1st to 3rd October. Matt Taylor from our Melbourne Office and I will be attending the Conference and will be available to meet any Queensland advisers whilst we are there. You may like to discuss the value of your business or consider buying another FP business whilst prices are low.  Email me if you would like to meet for a private discussion about your FP business.

Prices Paid for FP Businesses

Since Christmas prices paid for financial planning practices have stablised and in some cases, even reduced. The main 2 causes have been the downturn in the sharemarket and a change in supply with more sellers entering the market. Planners who were once considering staying in the industry have now decided to sell and not wait for a market recovery. Selling with lower trails now seems a better option than waitingstressed and not knowing what’s going to happen in the next year or two. A planner’s average age is now nearly 60 and last year 23% of sellers who contacted Radar Results indicated they were selling due to ill health. Many said they were “just burnt out” after 20 years of looking after clients. Basically, they’ve just had enough and would like to either do something different or just spend time with their families.  So, what would you receive today for your FP business?

Prices paid for FP practices – last 5 months 

Radar Results experience shows that larger practices with a sale price of between $1M-$3M and situated in a capital city, will sell for 3.0-3.5 times recurring revenue (RR). Larger practices can also sell on an EBIT mutiple of 4-6 times – which hasn’t really changed. Smaller practices are selling for a slightly lower price multiple of between 3.0-3.2 times RR. We are finding country and regional FP practices tend to sell for an even lower multiple due to their isolation.

GlassesOften a practice will sell the lower end of their client base, commonly referred to as Cs and Ds. Surprisingly these prices have actually increased from around 2.0 times RR last year to 2.2-2.8 times RR now. It’s also interesting to find there’s a lot more of these types of books coming to the market place. Advisers find them easy to transfer to a buyer (usually within 30 days) and the additional capital can be used for an A grade client reward program, new offices or pay off debts. It’s hard to know when is the best time to sell but try and do it while you’re healthy. Remember, 1:4 sellers suggest their reason for selling is burn out or something more serious.   

If you’d like your practice valued so you’ll have an idea of what price to expect, just click on the link Valuation Questionnaire – which will take you 4 minutes to complete. We’ll have a written appraisal back to you in a few days. Any questions just give me a call on 02 4384 5670 Head Office – Central Coast NSW.

Selling your C’s and D’s

Thirteen years ago I doubled the value of my recurring income in a matter of weeks. After attending a Boot Camp on Financial Planning I was convinced that if I doubled my trails and provided a service to my FP clients equal to the increased trail, I would have a better business. I increased the trails from 0.375% to 0.750% and wrote out to all the clients explaining why. Naturally, I had a few phone calls but only lost one client. Actually it was a client who always complained about fees anyway, so I was quite relieved to see him go. My annual FP trail income moved from $100,000 to $200,000 overnight which allowed me to provide a lavish and pampering client service program. More referrals followed and today that business has $300M of FUM. The FUM in 1994 was zero. If you’d like to read further, I have one other tip on making life easier as a planner.

Getting rid of your C’s and D’s

The same Boot Camp Conference suggested life would be a lot easier if I didn’t have to deal with the C and CalculatorD grade clients. I might add here that my definition of C’s and D’s can be quite different to the industry’s definition. The speaker said to hire a bus, load them all on and drive them down the street to the nearest planner and give them away. I understand what they were saying but it seemed a bit graphic. These days you can sell the Cs and Ds, and sometimes, for quite good money. When I sold mine in 1995 it was such a relief. I could now concentrate on those As, the one’s who pay me the most, appreciated the service the most and referred like minded people. Allowing for execptions D’s refer D’s and A’s refer A’s.  So how do you do it – get rid of your C’s and D’s? It’s all about finding the right buyer and that’s how we can help.

Finding the Right Buyer

MagsearchFirstly, by having your C’s and D’s professionally valued, you’ll then know what price to expect. At least a ball park figure without spending any money – just a few minutes of your time. Radar Results uses many criteria when valuing C’s and D’s, all explained on our website under the Selling a Financial Planning Business tab.

It’s a free service and takes about 4 minutes to complete the online Valuation Questionnaire. We also supply the right buyer and there’s no fee to sell using our service. Any other questions just give me a call on 02 4384 5670.