Advisers Unclear About Business Growth Value

The result of our latest poll is in and we’re not sure what to make of it…

As we go to print, just under two-thirds of those participating in our poll think their advice business will be worth less in 12 months than it is today (44%) or they’re not sure (20%). Correspondingly, just over a third (36%) think their business value will be worth more.

One of the interesting elements of this conversation relates to the comments we’ve received, which imply that because these advisers believe the coming 12 months will deliver a somewhat gloomy period for advice businesses, they think that at least risk-focussed businesses will grow in value over that time.

This reasoning suggests the possible exit of advisers and advice businesses from the sector will have the impact of increasing the value of those that remain. As one adviser put it:

“Against the background of conditions only getting harder and commissions coming down, the value of a risk-only business with reliable, non-seasonal renewal commissions and well looked-after clients will only increase if anything.”

The same adviser noted,

A renewal income stream like that is gold…

“A renewal income stream like that is gold and the stability of such flys [sic] in the face of all the volatility…”

We’re not sure where we’re heading with this debate, motivated by the recent release from Centurion Market Makers that asserts life insurance advice practices have continued to hold their value over the past year but the impact on practice valuations due to changes in professional standards is not yet clear (see: Life Practices Hold Value…).

We agree with Centurion. It seems that it’s just too early to tell what impact the current regulatory changes (Life Insurance Framework refroms and the future minimum Professional Standards requirements) will have on the advice sector in general and the risk advice sector in particular.

Do you agree with our adviser comment that the value of risk-focussed businesses will increase in the next 12 months because of a possible exodus of risk businesses? Or do you think the value of risk-focussed businesses will actually head south for the same reason?

As we noted last week, the complex environment in which any service business operates is subject to both unique and universal factors, and we know that we’re simplifying the conversation a little. But, given your current understanding of the value of the advice business in which you opoerate and your understanding of what the next 12 months will bring, cast your vote and tell us what you think, as our poll remains open for another week…