Older financial advisers are not realising the value of their business during a sale due to a lack of succession planning and a shortage of younger advisers who can afford their practices leading to fire sales, according to a business broker.
While most succession plans are being triggered by advisers looking to retire, Connect Financial Service Brokers Chief Executive, Paul Tynan said more business sales are occurring as advisers are forced to move on due to ill health without any prepared plan for this exit from the business.
Tynan said he has not seen the current levels of quick sales and rapid exits at short notice before and said the current level of advice practice sales is the result of adviser retirements.
“Depending on who you talk to, they will say (optimistically) it is either a buyer or sellers’ market at present. But the undeniable reality is that there is a Baby Boomer bubble of owners trying to sell their small businesses to the next generation but there are not enough Gen Y buyers interested,” Tynan said.
“…the undeniable reality is that there is a Baby Boomer bubble of owners trying to sell their small businesses…”
He also stated that staff buyouts of these businesses was not realistic in many cases due to potential buyers working within the practice already holding personal debt through university education, mortgages, lifestyle expenses and children and were unable to fund a business purchase.
Tynan said advice businesses that had prepared for a succession ahead of time and were responsive to change were still valuable and were being actively sought by buyers.
“Businesses that have been structured on corporate client centric service and advice models with good processes, latest technology and adherence to the highest standards of compliance are always in demand and receive premium offers,” Tynan said.
“Not all Baby Boomer business owners have been sitting on their hands and they have responded with business models attune to the new era of professionalism and provision of advice services in the 21st century. But there is definitely a significant sub set within this demographic with resistance to change firmly ingrained in their DNA and have been consistent reluctant adapters to modernise,” he added.
Tynan also stated that industry associations had struggled to get their members to recognise the need to plan for an exit and succession and conferences and workshops would not motivate those who have yet to act.
“We are now firmly in an era where change is the norm and it is only going to speed up and get faster and faster. How the government, industry professional associations and business owners cope with succession planning is open to many questions,” Tynan said.
“Perhaps a program as dramatic as the road safety commercials is the only means of shocking the recalcitrant planners and accountants into action.”
