|LINGERING EFFECT OF FUTURE of FINANCIAL ADVICE (FOFA) REFORMS ON PRICE
When selling your business, many more questions are now being asked by potential buyers, such as:
– Do all your clients need a Fee Disclosure Statement (FDS) issued or just the fee-for-service clients?
– Pre-July 2013, which of your clients are grandfathered under FoFA?
– How many clients need an opt-in letter sent every two years?
– Since July 2013, how many clients are new?
– How many are grandfathered clients, and have since had their investment and strategy substantially change, turning them now into opt-in clients?
– Is the volume bonus going to move to my licensee?
– Will the over-ride bonus previously paid by product providers to the vendor continue after the sale?
The additional red tape caused by FoFA reform has led to fee-for-service multiples for client registers, and planning books to either plateau or fall. Certainly, risk insurance books and businesses haven’t been affected by FoFA reform, and still command the highest multiples of recurring revenue within the financial service sector.
Accounting practices remain in high demand, particularly in the city and regional areas. Mortgage book prices are at an all-time high, and buyers are keen to pay cash for even the smallest books, for example, $2,000 per month trails. Unfortunately, the corporate superannuation section still suffers, with many planners not even prepared to make an offer. With commissions being turned off early next year, planners are now in search of institutions to replace these commissions with a flat fee per employee.