What’s selling, Who’s buying?

More financial planning practices and client registers have hit the market now that the Government has clarified grandfathering. In an amendment to the FOFA regulations, the following additional wording now has sellers and buyers very happy, ‘A person who purchases a business has the same rights under this regulation that the seller of the business would have had if the seller had not sold the business.’ Govt Exposure Draft 28 Jan 2014, Item 19.

Sell Buy Merge Experts, Radar Results, received last month 9 new practice listings to sell, virtually ending the drought that started last July.

In addition to an influx of new sellers of financial planning practices, we have seen higher demand than usual for mortgage books, forcing prices up. Recently a seller was offered two times the trail. Irrespective of where your mortgage book is located, Kalgoorlie, Alice Springs, Broken Hill or Townsville, buyers are paying cash 1.5x to 1.8x trail, no questions asked. And it doesn’t matter who is the aggregator.

Accounting practices have continued their climb up the ladder, probably being the second most sought after financial services business (to buy). Sellers in Sydney and Melbourne are the most popular, particularly if they have around $500,000 to $1M in accounting fees.

Corporate superannuation has made a recovery. After multiples had dropped to as low as zero, demand has now picked up, and so have prices. It really depends on who the fund manager is that’s providing the administration service, and which licensee the buyer’s with. Some licensees are paying their advisers, who are qualified corporate superannuation fund specialists, a flat annual fee per member to continue servicing the plan, even though the commission has been switched off. In some cases, the flat fee is higher than the commission that was being paid originally. Hence, multiples have moved up to 1.5x to 2.0x. Depending on the licensee, a buyer of last resort (BOLR) can be offerd up to 3x the revenue.

D-Linked corporate super clients still have some value depending on which institution manages the fund. Some super fund administrators can guarantee the payment of revenue for up to 3 years, or until 2017, at which time commissions must cease.

Queensland is still the busiest state for Radar Results with currently 25 practices looking to sell, followed by NSW with 24, Victoria 10, WA 8, TAS 1, NT 1 and SA 1.