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Advisers Unclear About Business Growth Value

Will your advice business be worth more in 12 months than it is today?

  • No (42%)
  • Yes (36%)
  • Not sure (22%)

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…

  • Squeaky_1

    RiskInfo is correct. It is too early to tell for sure ‘exactly’ where values will be next year, 2020 or 2024 for sure. I have some ‘suspicions’ however . . . After 33 years in the industry as a risk writer every fibre of my being says one main thing – a pure risk based client base is one of the very best bets you can make in ANY manner in ANY investment field as it reeks of stability and is, as said in the article, non-seasonal. I have bought 3 client bases over the past 20 years and each one has increased in value by a significant margin. It is like tending a garden. You do not have to do spectacular things. You do not need to be a genius. It is pretty bloody simple actually. You do what you know you should do every day. Nothing more, nothing less. Surprise, surprise, you look at it all one day and see your income has doubled, tripled, quadrupled! Wasn’t that easy! Not many investments can do that can they. Truly, if you have the opportunity to buy a client base, a pure risk one, then grab that opportunity with BOTH hands and don’t let it go no matter what.
    .
    This idiocy surrounding LIF will pass but there will still be politicians and charlatans and they will find more trouble to create for us, more compliance. Through all this if an adviser has a grandfathered renewal stream he is just about invincible financially. I was planning to buy another client base which would yet again double the size of my existing renewals. 2024 looks like killing that idea as I’m sick to death of these idiots saying I have to become a brain surgeon to continue servicing risk clients past that date. I’ll probably get out based on how I feel currently – too much idiocy from the clueless academics and politicians (looking at you, you dummy O’Dwyer!) who have never sat with a client and don’t understand the needs of clients.

    Yes, risk client bases will indeed increase in value REGARDLESS of how many come onto the market. There will never be enough for the demand – how can there be? With commissions and hence new business earning potential coming DOWN a reliable renewal stream available for purchase will continue to be a prized and rare asset.
    .
    I am not a genius but I and most advisers understand how valuable a virtually guaranteed income stream is to their business. Not rocket science thinking this through. I’ll be selling mine most probably and have not a single concern about it’s value. I will be offering it for 4 x the annual renewals. many good client bases have sold for this in ‘off-market’ private transactions despite what Centurion would want to tell you. I’ve seen it happen much more than once. It is rarely spoken about though. I will walk away rather than argue if a buyer will not pay that. Somebody will as it is an almost perfect database.
    .
    If you think it through, I’ve found that in my experience if one had to pay even FIVE times renewals for a **GOOD** client base it would still be well worth it. I know how that sounds but think about it. It pays for itself before you know it and along the way you have a ready source of new business and referrals. Too perfect! What investment does that?!! People just don’t realize how good this makes life! (no pun intended).
    .
    could not imagine facing this new regime without solid renewal streams behind me . . . I wouldn’t try it actually. new business commissions are too low now or certainly will be in 2 years. Ridiculous. Think it through and you’ll be amazed – I was initially. It is, always has been and always will be a sellers market, as it should be after cultivating a client base for decades. The buyer will get their time to sell – it will still be a sellers market then too. Cheers all.