Gloomy is the best description for the marketplace at present as practice owners find themselves in a holding pattern, unable to sell or transfer their businesses to potential new owners due to the uncertainty around the final version of the Future of Financial Advice legislation.
It is imperative that the legislators and industry stakeholders move quickly to remove the roadblocks that have created this environment so that practice owners can get on with their lives and have some certainty and transparency in their exit and succession planning endeavours.
As business owners, these financial advisers have worked diligently providing succession advice to clients from all walks of life and now those that are seeking to retire or implement a succession plan find themselves facing an unprecedented period of apprehension.
In the past, buying, selling and merging financial planning businesses has resulted in a loss of shareholder value, disgruntled clients and mixed feelings from all concerned. The underlying cause being the focus on price and not understanding that financial planning is a relationship business.
Perhaps the main stumbling block is escalating concerns around FoFA, which is reflected in numerous transactions being placed on hold until the Australian Securities and Investments Commission sorts out the legal restrictions, in particular, the loss of grandfathering if a practice is transferred between different licensees.
Currently, Connect Financial Service Brokers (previously Kenyon Partners) has far more buyers than sellers on our books.
The way forward
Compounding this problem further is the looming exit of the baby boomers as they seek to retire and leave the industry over the next 20 years.
The Australian financial service sector is about to encounter a huge transfer of business ownership. As an industry all stakeholders need to explore and implement new and innovative strategies to accommodate the transfer of these businesses to the next generation.
FoFA will see planners focusing on quality advice in a new transparent world of fees for service, and being able to articulate and document what they are delivering to their clients.
Consumers of the future will be facing an equally daunting and complex world and the demand for the services of high quality financial planning practices that operate client-centric businesses that focus on delivering quality sophisticated services to their clients will only increase.
In order to move forward, the industry must encourage new advisers to enter it, support the new FoFA direction and understand this is a relationship profession.
The post-FoFA era will be one of greater certainty for practice owners and planners. It should see financial planning recognized as a truly professional service.
Paul Tynan is chief executive of Connect Financial Services Brokers.
