Apex Insights > Your Business > Financial advice reforms sweeping the globe

August 2019

Gayle Bryant explores the options and best approach when exiting an advice business.

Estimates are that up to one third of advisers are planning to leave the sector by 2024. By 2024 all financial advisers must have a degree qualification and pass an exam to call themselves such. This is a requirement many are not willing to meet and a powerful motivator for advisers to sell up and leave the sector.

Estimates are that up to one third of advisers are planning to exit the sector before 2024. The reputational impact of the banking royal commission is just another persuasive force behind advisers’ exodus.

A study by UBS entitled ‘School or Beach?’ found about one-quarter of Australia’s 25,000 financial advisers will leave the industry over the next five years. UBS found the biggest catalyst for the exodus is the new educational requirements. UBS stated that while it is difficult to gauge how individual advisers will react to new educational standards, it felt it was reasonable to assume at least 25 per cent of existing advisers could exit the industry over the next five years due to the new standards.

“This excludes natural attrition through retirement, which we believe in normal times would be offset by new entrants,” UBS stated in its report. As a result, some advisers exiting the industry may decide to sell their business.

Getting your business sale ready

So, if you’ve decided this is the right path for you, how do you go about selling an advice business and what does a potential purchaser look for when considering one?

Tim Lane is a partner with Centurion Market Makers, which assists owners of financial planning businesses seeking to sell or buy. He says there are three ways to exit a business:

  1. If you’re in a multi-partner practice you can be bought out
  2. If you are a sole practitioner, you can merge with another practice
  3. Sell it outright.

“Following a particular process can make the sale process easier,” he says. “The first thing to do is gather all the relevant information and data – in the same way you would if selling any business. Then you put together an information memorandum that positions the business in the most positive way possible.”

Lane says the point of the memorandum is to answer as many questions that a potential buyer is likely to ask as this makes it easier down the track.

Bringing in a broker

One Queensland-based financial adviser that shared her story says she sold because she was genuinely ready for retirement.

“I had a discussion with a specialist business broker who was able to confirm I’d achieve the value I was hoping for,” she says. “The main challenge with selling actually occurred after the transaction was completed, when I was trying to get the client base transferred from my dealer group to the acquirer’s AFSL [Australian Financial Services Licence].”

While this financial adviser was happy with the outcome she said working with a broker helped considerably. “It reduced my stress levels and I’m sure I would not have achieved the same outcome had I chosen to do it alone,” she says.

“One thing I would say to advisers who are considering selling is to take the time necessary to prepare your client information – it pays off in the long run.”

Steve Fine is managing director of Growth Focus, specialists in acquiring and exiting financial planning and accounting businesses. He says there are four factors that are important to advisers who want to sell:

  1. price
  2. that clients will be taken care of
  3. that staff will be taken care of
  4. that payment terms are acceptable.

Common mistakes to avoid

“There are some common mistakes advisers make when selling,” he says. “One is getting overly emotional,” he says. “Others include only dealing with one buyer at a time and not being overly clear on the exact outcome they are seeking.”

Lane agrees the biggest mistakes occur when an adviser decides to talk to just one potential buyer rather than multiple ones. “If you’re just dealing with one buyer it’s more difficult to manage timelines and you lose the competitive edge that you have when dealing with multiple buyers,” he says.

Being too emotionally attached is another issue. “We’ve seen transactions break down because the seller hasn’t liked something the potential buyer has said,” Lane says. “A good price is one thing the seller wants to achieve but few advisers will sell if they don’t trust the buyer.”

Do your due diligence

It’s also important to ensure the potential buyer has access to funds. “This has become more difficult now since the royal commission,” Lane says. “We’ve had offers for businesses that have been fantastic but then find the buyer can’t get the money so in the end it’s not a great offer at all.”

One 30-year-old financial planner who bought a business says he learnt a lot from the experience. “I bought because I needed to generate additional turnover to allow me to cover extra staffing,” he says. “I could either grow organically or buy an existing business and I needed to grow quickly so I went for the latter.”

He says one thing he would advise is to really understand what you’re buying and this involves undertaking a very comprehensive due diligence process.

“You also need to understand the different service offerings between businesses,” he says. “Some planners may contact their clients up to 10 times a year while others might do it only once or twice so you need to match up service delivery and client expectations.”

Plan your exit

Overall, Lane says, the biggest mistake is leaving the decision to exit the business too late.

“If you’re a sole practitioner who is thinking of retiring and selling the business in five years then I’d suggest you get another adviser on board now and let them have say 5 per cent equity,” he says. “Then when it’s time for you to leave you will have someone in the business that knows it and has equity in it and they’ll be in a better position to buy.”

Growth Focus’ Steve Fine advice for a successful sale is to:

  • have well prepared and presented data
  • protect the business owner’s anonymity
  • cast a wide net by presenting the opportunity to the whole market
  • qualify buyers correctly (financially and emotionally)
  • undertake a formal, structured sales process
  • clarify the terms of the ideal outcome the owner is seeking
  • prepare a non-legal heads of agreement document to clarify the exact terms of the transaction between both parties before moving to the next stage.


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