Gloomy Picture Painted for Staffing Regional Advice Firms

0

Many active buyers of financial advice and accounting businesses are now seeking acquisitions in the capital cities rather than in the regions, as a consequence of the increasing challenges associated with recruiting staff in regional areas.

This bleak picture is painted by buy/sell expert firm, Radar Results in its July update, in which it reports many of its active buyers who used to consider regional areas in Australia for acquisitions in pre-pandemic times have now switched their focus to the capital cities because “…since the pandemic, it’s almost impossible to employ staff to replace the business owner.”

…financial advisers and qualified accountants are impossible to find outside capital cities

The firm notes that financial advisers and qualified accountants are impossible to find outside capital cities. It says its stable of active buyers is no longer prepared to risk not having support staff to run these businesses once the outgoing owner has departed, and that the lessening demand for regional advice practices has been accompanied in turn by a fall in the value of the regional business – or at least the price that acquirers are prepared to pay.

In another emerging trend, the firm reports that in both capital cities and regional areas, demand has lifted for books of clients who pay higher fees, where the minimum fee payable to a financial planner is expected to be around $4,000pa to $6,000pa.

From July, because of this emerging trend, Radar Results says it will now be publishing two price guides for financial advice businesses based on:

  • The age of the financial planning clients that are sold (existing version)
  • The size of the client fee paid for the review service (new version)

Latest pricing multiple ranges using both these criteria, as they relate to life insurance clients, according to Radar Results, include:

Client age

  • Risk clients (under 55 yrs): 2.2x to 2.7x
  • Risk clients (ages 55 to 60 yrs): 2.0x to 2.3x
  • Risk clients (ages 61 yrs+): 1.0x to 1.5x

Client fee

  • Average fee per risk insurance client $2,000 to $4,000 per annum: 2.2x to 2.5x
  • Average fee per risk insurance client $5,000 to $10,000 per annum: 2.6x to 3.3x