Practice Sales Spike Over LIF and Education Concerns

The number of life insurance advice businesses for sale has spiked, according to a financial advice business broker, who claims the increase is a result of the impact of Life Insurance Framework (LIF) and proposed new education standards.

Radar Results Principal, John Birt

Radar Results Principal, John Birt said the impact of LIF and the FASEA education proposals has also pushed down the value of high-quality risk books for sale by eight per cent.

Birt said the value of a risk practice with clients under 55 years was worth 2.5 to 3.2 times recurring revenue down from 3.5 times in March 2018. A similar drop in value was evident in a risk practice with clients over 55 years which were being valued at 2.2 to 2.6 times recurring revenue, down from 2.8 times in March of this year.

“There is more risk insurance businesses on the market now than at any other time that I can recall”

He attributed the downturn in practice valuations to the introduction of LIF on 1 January this year, with advisers concerned about the reduced level of up-front commissions and the two-year clawback period, as well as the need to return to study if the FASEA education proposals are implemented.

Birt said these issues, combined with the impact of the Financial Services Royal Commission, “…has influenced more businesses to come to market. With many more sellers now in the market, there’s a larger choice, and a decline in prices now offered”.

“There is more risk insurance businesses on the market now than at any other time that I can recall,” he said, adding the numbers of risk advice businesses being offered for sale through Radar Results had risen five-fold.

“We have been operating for 12 years and typically we have three to four risk advice businesses, among the 80 to 100 advice businesses, on the books for sale at any time. In recent months, however, that number has increased to around 20 risk advice businesses,” Birt said.

He added that advisers looking to sell a risk advice practice were evenly split among those leaving because of the changes to education standards, and those concerned about the impact of LIF, and any possible future changes that may come out of the Royal Commission.

  • GuyM

    Well that didn’t take long… As irrelevant as the ‘education reforms’ are for risk specialists, I would be willing to wade through them IF I had certainty that there will be an industry for the next 10 years. As it stands, once LIF gets to year 3 I plan to be writing a lot less new business than I am now. If commissions are subsequently banned and the whole thing goes kaput (which it would from the perspective of a risk adviser’s ability to make a living) I would have invested a considerable amount of time and money to operate in an dead industry in which I couldn’t cover costs. The question is when are the people who are tinkering with our livelihoods and our client’s financial security going to explain exactly where we stand?

    • Ken

      We are standing on the edge of a cliff unfortunately with several politicians insurers and banks ready to give us a push
      I said many times the whole puropse of LIF was to get the individual advisers out and give the banks and insurance companies more control over who they want and don’t want as clients and sales outlets They do not give one “ hoot” about the individuals or the massive under insurance issue they are creating.
      Don’t worry about commissions being stopped altogether that’s the sword in the back and it the crowning jewel in tis “cartel” activity
      The Royal commission as correct as it has been with its findings has “ blanketed the whole industry as being corrupt from management to sales even though the huge majority of theft and dishonesty was produced by high ranking bankers fund managers and people on massive salaries who had control knew what was happening and chose to do nothing about it
      I have tried to be optimistic through all this but unfortunately my optimism is gone and so is this profession I have loved to be of service in for 42 years VALE retail insurance industry

  • emkay

    No surprises here. The real question is, at age 58, do I sell now or wait until 2021 or 2024? What value the business then? If Short-on gets in then I believe a new attack will commence, after all the industry funds flog their sub-standard insurances and we will be in their way. We have no chance and the AFA and FPA will continue to do sweet FA to help.