Fee-for-service financial planning practices that are looking to acquire rivals are showing no concerns over what impact incoming legislation, including opt-in arrangements and the banning of commissions, could have on practice values, according to financial planning broker firm Kenyon Prendeville.
"It is a growth industry despite all the legislation," Kenyon Prendeville director Alan Kenyon said at the FPA 2010 National Conference last week.
"So licensees that are already fee-for-service are confident about their value proposition and the business opportunity that lies in acquiring some of those businesses that still have largely commission-based books.
"The only two things that matter are the cultural fit and business opportunity. So, do both businesses think alike and can the acquisition target add new opportunities such as risk insurance and self-managed superannuation funds?"
But he said what prospective buyers have become more cautious about is whether the clients of potential takeover targets have any exposure to embattled investment products.
"Acquirers are having a closer look at the demographics, segmentation and certainly are conducting more product analysis as they do not want to get caught with clients who have toxic assets and agribusiness exposure," he said.
Kenyon Prendeville director Stephen Prendeville said the revenues of most types of advisory businesses were still below 2008 levels, so acquisition activity is currently high as practices seek to boost their top and bottom-line profits.
"In the last two years planners generally haven't been writing much new business," he said.
Kenyon Prendeville is currently representing 25 businesses looking to sell, and is in discussions with a further 50-60 practices who want to sell in 2011.
"Whilst we have seen an increase in supply, we have seen correspondingly an increase in demand and therefore maintenance of business valuations," he said.
