Chief of wealth management business ipac Securities Peeyush Gupta has warned his peers against listing to make a quick buck and speedy exit.
Australian Financial Services, Centric Wealth and Professional Investment Services are among the financial services companies preparing to list on the Australian Securities Exchange.
"I fear that some of my colleagues in the industry are seeing listing as a lucrative exit in the near term - and it isn't," Gupta said.
ipac considered listing before it was acquired by Axa five years ago.
Listing was not the solution for creating liquidity and achieving succession, he said.
Gupta admitted a float was tempting as the market was running at price to earning (PE) ratios of 20 to 30 times funds under management (FUM).
But, principals tend to hold on to the majority of the stock and PEs for micro caps can swing wildly, Gupta warned.
"My strong counsel would be if you're going to consider listing its only because you're seeing it as a longer term journey," he said.
"[Or if] you want access to the capital markets to raise capital, perhaps to grow your firm, but don't think of it as a quick exit solution."
He warned smaller firms against achieving succession by joining together and preparing to float because disparate businesses lacked common business models and governance.
"On paper unlisted businesses trade for seven, eight, nine [or] maximum 10 PE and listed businesses depending on the market cycle, trade from 10 to 20 PE," he said.
"On paper it looks like it's a lot bigger. The temptation is to say: 'well, we're all very small businesses, why don't we all get together and make a motza?" I think that very rarely works."
ipac has provided 30 succession plans including book buys to the purchase of business over time through equity partnering since 2001.
Five firms have joined its equity partner program this year. They are BMRI Financial Services in Adelaide, Parramatta-based Strategic Wealth Solutions, Total Super Solutions in Melbourne, LifeFX in Brisbane and Capital Income in Canberra.
Gold Coast-based Strategic Planning Partners completed its equity partnership at the end of June. ipac has taken control of the business, which has more than $400 FUM.
