The issue of succession planning is an individual one and the timing is personal – however as the baby boomers move to retirement Connect Financial Service Brokers (Connect) CEO Paul Tynan has noted a growing pool of potential buyers for advice practices and it is the largest he has seen for many years.
Ironically, a lot of buyers seeking an advice practice are 40 – 50 years old and they need to ‘buy a job’ said Tynan. “They have been downsized or don’t like the new institutional world, have been transferred out of an area or have decided they want to be their own boss in charge of their future professional /career destiny”.
The buyers Tynan is currently working with fall into the following categories:
• Companies making strategic acquisitions
• Financial planning businesses looking to diversify
• Individual buyers (including salaried advisers) leaving corporate careers
• Individuals looking to transition into self employment
As a result of this undersupply, buyers are becoming frustrated and this in the past has led to the wrong purchase being made added Tynan. “The history of the Australian financial service industry is quite literally littered with terrible acquisitions and mergers”.
The need for good advice has never been more important as information is quite literally spun around the world in seconds. In addition, international trade barriers are evaporating as we speak and outsourcing is the norm of businesses not just ‘best practice’.
In this environment, succession planning is not going to get easier added Tynan. ‘A seller will never get the perfect business environment to execute their retirement and exit plans. In fact, if you are waiting for the economy to move into growth mode; or for the government to pass the FoFA legislation – forget it!”
Tynan says if practice owners are basing their retirement plans on markets and politicians to ‘come good’ – that this is no way to plan for retirement and under these circumstances, they will never retire.
However there is a further consequence and a developing trend and that is retirement plans being taken out of the hands of many individuals due to deteriorating personal health, death, bankruptcy, divorce, legislation and general business conditions/environment.
Tynan concluded, “Prospective buyers of practices need to be patient and not be ‘spooked’ into making inappropriate acquisitions that have the potential to be long term catastrophic financial decisions”.
“Equally sellers must plan their own exit which is a balance between business, health, finance and lifestyle to suit their individual circumstances and then take into account current market conditions and review their valuation expectations accordingly.
“Ultimately, for both buyers and sellers the only constant is change – and growing older!”
