Financial Partnership Group director Greg Devine has called for the financial planning industry to look into how practices are valued in the wake of his business entering voluntary administration this week.
The Perth based financial planning business, licensed by the National Australia Bank's Godfrey Pembroke Group, entered into administration after accruing $15 million dollars of debt, the Financial Review reported yesterday.
"It's the corporate restructuring that needed to be done, as clearly there is a substantial debt and clearly that debt is less than the substantial value, but that value only comes from either selling to someone else or the exercising of conditions," Devine said.
"This is a whole industry issue, there are many dealers providing many different ways for you to grow and develop your business and at the end of that you must have a succession plan. I chose to grow my business and find someone to buy it or take advantage of my business equity valuation.
"The industry is in a very interesting and changing time at the moment. Traditionally businesses were build on ongoing revenue, but when you try to build a business, that way you generally forfeit the ability to make a substantial profit and hence businesses today are being sold on earnings before interest, tax, depreciation and amortisation and not on a funds under management multiple.
"A business equity valuation works well for a small business but not for a larger one . If I was twice as big it would be twice a bigger problem."
Devine was part of the Deutsche Asset Management team bought out by NAB-owned MLC six years ago. Prior to his time at Deutsche, Devine had periods at Bain & Company and H&R Block.
