Accountants and planners’ expectations continues to fuel sale and exit inertia says Paul Tynan

accountants and planners

Mature age accountants and financial planners are continuing to defer the sale of their practices in the erroneous expectation that their business will attract a higher price amongst a growing pool of prospective buyers said Connect Financial Service Brokers (Connect) founder Paul Tynan.

Commenting further, Paul Tynan confirmed that over the summer break, he had been approached by a number of overseas organisations that are currently appraising or have entered the Australian marketplace seeking acquisition opportunities. “These groups have been observing the local market for a number of years and are now implementing their strategies.”

“However, the key acquisition requisite is sound, successful business models with modern, efficient operational frameworks.”

Although there has been heightened M&A activity since the beginning of the year, the number of buyers continues to outnumber accounting and financial planning sellers noted Paul Tynan. “But it is the ‘quality end’ businesses that are attracting the attention of prospective buyers.”

Accounting practices are in demand – more so if they have a robust exit and succession program underway supported with outsourced processes, utilising technology and a modern HR practices that upskills the capabilities of staff.

Paul Tynan has repeatedly said the traditional accounting partnership equity model has broken down and is no longer relevant or able to support mature age partners to exit and retire. Primarily, young industry entrants are preferring not take on more debt and have no confidence in the capacity of the business to address the challenges of the changing accounting landscape. Many accounting firms are unwisely entering into licencing arrangements they will regret in the future as financial planning / institutional dealer groups continue to aggressively attempt to licence up every accountant to their network.

There is mixed news for mature age financial planners who now have certainty with the passing of the life insurance remuneration arrangements and professional standards legislation affirmed Paul Tynan. “Unfortunately, their exit goals have been dealt a significant body blow as the new entrants to the financial planning industry (and potential buyers) will struggle as SMEs in their all-important start up years.”

“Buying an existing business under a new AFSL will mean no trail brokerage can be transferred thus deterring the next generation of planners to enter the market.”

“With the increases in compliance / licencing / PI costs, new entrants will have no option but to start their financial planning career with an institution.”

Mature age planners have a number of difficult and glooming scenarios ahead –

  1. Sell in the current market where there are more buyers and negotiate the best valuation multiple outcome.
  2. Hold on continuing to receive the income stream of the current business which has two unknowns: – will the current business valuations hold up as the industry moves further into a fee for service world? – education requirements will eventually stop the owners from being licensed and receiving trail brokerage.
  3. Heath and personal capacity issues and the rise of compliance costs will inevitably bring new challenges.

“Accountants and financial planners are confronting the ‘exit and succession perfect storm’ and staying out at sea in a rapidly deflating life raft is not the answer.”

“If now is not the time to sell – then when?” asks Paul Tynan.

Issued by Connect Financial Service Brokers

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