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Selling your Financial Planning business? A shake up is in store.

The Financial Planning industry has been shaken up over the last decade with government legislation driving a complete restructure of advice models across Australia. Following some heavy punches landed over the past 5 years regarding insurance, investment commissions and the ethics of Financial Planners, the new education standard proposal that has just been rolled out by FASEA is brutally strict.

With no surprise, there are whispers that many Advisers in the market are implementing their own succession planning and looking to hang up the boots before January 2024.

Whilst it’s completely understandable why the exodus might occur; particularly for Advisers that are entering the twilight of their career, there is likely going to be a flood of client’s books and practices that are up for sale over the next 6 years which means an oversupply to the market. Buyers will have a plethora of choices available to them so the quality of businesses for sale, and separation from the market is going to be really important.

If you’re looking to sell your business, or acquire a book of clients from an Adviser there are a few key factors that we’ve identified which can really make a difference to the quality. As a result the price an owner can command changes and businesses can separate themselves from the noise as a great purchase for Advisers who are looking to expand.

1. Independent Valuations Are The Best Valuations

A similar message that Advisers use on their clients, “We’ve done this hundreds of times before”, can be said for valuing and transacting on Financial Planning businesses. Advisers can romanticise the value of their own business and inflate it, pricing out legitimate buyers, or cost themselves at the table because they miss hidden value that another business might be able to extract from the book due to different processes or capabilities within their business.

Using an independent expert like Radar Results will give both parties a fair value to negotiate the sale.

2. If Data is King, Then CRM’s Are Queen

There are so many insights that you can get from having a great data base with technology available now, so imagine what we can do with data in another 5 years’ time?

Not only is accurate data key to being able to evaluate a fair sale price, maintaining a clean, crisp CRM with accurate data will greatly assist potential buyers integrate the business into their existing practice or start fresh as a new Adviser.

If you’re planning on selling make your CRM a focus, it’ll be the greatest sales tool that you will have at your disposal.

3. Client History Tells a Story

The planning industry has entered an era of compliance at a level rarely found in other industries. Acquiring a client base from an Adviser means that the purchaser is also taking on the risk of any gremlins that are nestled within the advice that has previously been given.

Allay concerns by maintaining clear audit trails, file notes and compliance history within your CRM. Knowing that you’ve run a tight ship will enhance the appetite of the buying market and ease them of any concerns that they might have on the advice that was provided. It also provides them with all the information that they’ll need to discuss any concerns with inherited clients.

4. Go Digital, Go Central

Time is the greatest commodity that any Adviser has. It’s one thing to have all the information on the clients but it’s another to be able to find it, and it can be incredibly time consuming to sift through disorganised client records.

Getting all your client data into a secure centralised location and ordered in a manner that is easy to navigate is going to increase your business’ value. Not only does it relieve the stress for potential buyers, but it makes it far easier for buyers to incorporate clients into previously developed systems and procedures that they’ve already built.

Make sure that a buyer knows Advisers are going to spend more time in front of the new clients rather than buried in messy administration and uncertainty.

5. Selling The Whole Kitchen Sink, Not Just Clients

Across the industry it has been widely reported that businesses selling tight processes, strong branding and impressive operational guidelines around how their services are managed fetch a significantly higher price in the market.

Many Advisers retain process and procedures in their head, having operated in the same manner for 20 years. Unfortunately, buyers don’t have access to the IP locked up in the sellers brain so it’s integral to the business value to unload that information into systems and procedures to be passed on.

If there is a strong documented process behind the business operation, it makes it easy for an Adviser to plug a new Adviser into the purchased business and run on their own with a framework to operate. This can be a very appealing proposition, particularly for dealer groups that are looking to expand.

6. The Relationship Matters

I think that we can all agree, no matter what legislative or educational requirements that are rolled out across the industry nothing will change the core fact that many clients are buying the relationship they have with the Adviser, not the products and services. This is a particularly strong sentiment in your smaller boutique financial planning practices.

To add value to the sale, consider a soft exit plan rather than a hard end date. Don’t hold on until the last minute and rush the sale, if you can assist the buyer with a transition period and manage the relationship handover, you’ll be adding a great deal of security to the buyer and alleviate concerns around attrition of the acquired clients.

7. Are You Actually Selling A Business?

Tying in closely with point 5, some Advisers do a fantastic job of building trust with their clients and position themselves as a centre of influence in their lives. Whilst it’s brilliant for client retention it’s imperative that you position the business as being able to operate without the core centre of influence for the client. If the clients are reliant on the Adviser rather than the business to deliver the service, the buyer is going to take on significant risk of losing those clients after purchase.

Plan ahead and start positioning the business to operate without being heavily reliant on one or two individuals ready for the transition period.

8. All Clients Are Not Equal

An important factor in the value of a planning business is the demographics of a client base and the alignment with a purchaser. Packaging and pricing a book of pre-retirees for a purchaser that predominantly works with Accumulators is going to create a miss-match in valuations.

Getting a clear representation of your client base will involve knowing:

  • Age

  • Location

  • Type of client

  • FUM

  • Sums Insured

  • Premium Structures

  • Commission Structures

Which all comes back to your CRM. If you keep your data up to date it makes it incredibly easy to run a report on the client details. With poor data, you get poor results and you’ll lose value if buyers can’t properly evaluate whether the client base is a strategic fit for their current operations or future vision.

Are You Planning To Sell?

For those of you who are looking to exit the business with the value that you deserve it’s time to put your planning cap on and implement a strategy for your business. Focus on the data and processes that operate your business and make sure that your business is ‘sale ready’ when the time comes so that you’re not left short on all the hard work you’ve put in over the years of great service to our industry.

Leverage the knowledge of your staff and professionals in the industry that specialise in Financial Planning data management and process development to start planning for the future and make sure that you’re maximising the value of your business.

Give us a call at Practice Dynamix if you’re looking to buy or sell your planning business and in need of any further guidance.

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