Advisers not sitting on gold mines

Advisers are discovering it’s not worth selling their businesses if what they are hoping for is a financial windfall, AMP’s head of wealth management acquisition says.

Friday, September 16th 2016, 6:00AM

by Susan Edmunds

Aaron Khlee

Aaron Klee said there were growing numbers of advisers who had decided that they wanted to retire – but it was not because they wanted to cash in on the value of their businesses.

“The maths on the exit strategy doesn’t work if you are looking to sell to make a profit. Normally it’s for non-financial means that they are looking to exit,” he said.

It has been suggested that more advisers may look to sell up and move on if they are nearing retirement and facing new, stricter rules under the new version of the Financial Advisers Act.

But Klee said, if an advice business would only sell for two times its annual revenue, many advisers would decide it was a better bet to stay at work longer.

“It does not make financial sense to sell the business. If you enjoy the income, enjoy working with clients – it doesn’t make sense to sell.”

But he said some were deciding they had had enough and wanted to do something different with their time. That was likely to become more common as the average adviser age increased, he said.

There were not enough young people coming into the industry, he said, but it was on a growth trajectory that would mean many more were needed.

“We believe wholeheartedly in the need to access quality advice and it’s a big problem.”

AMP’s business unit AMP 360 had had some success in recruiting for employed adviser roles, he said, and had added 70 advisers over the past three years, with an average age of 36.

“That’s one initiative to try to grow advisers into the market,” he said. Some had since moved on to start their own advice businesses or to work for others, he said.

Klee said AMP was looking to support advisers developing a succession or business continuity plan.

“Our message is you need to be planning, putting in place contingencies so if a health event happens or another unforeseen event and you’re pressured to sell, the plan protects the value they’ve created in the business they’ve been working so had on. Advisers spend days and weeks helping clients plan. Are they planning for themselves? That’s the big question.”

Tags: succession