Older advisers are continuing to delay selling their practices in the belief higher offers will emerge, according to Connect Financial Service Brokers founder Paul Tynan.  

“Financial advisers are confronting the ‘exit and succession perfect storm’, and staying out at sea in a rapidly deflating life raft is not the answer,” he said.

“If now is not the time to sell, then when?”

Mr Tynan says mature-age advisers face a number of gloomy scenarios that will affect their practices’ values.

“They could sell in the current market, where there are more buyers, and negotiate the best valuation-multiple outcome,” he said.

“Or hold on, continuing to receive the income stream of the current business.”

However, the latter option risks relying on diminishing income streams from reduced commissions. And it is unknown how valuations will stand up as the advice industry moves towards a fee-for-service model.

There are also new professional standards requirements, which could result in an adviser losing their licence and trail commissions.

Any potential buyer would acquire a business with no income, and that will deter younger advisers from owning their own practices, Mr Tynan says.

“Mature advisers’ exit goals have been dealt a significant body blow as the new entrants to the financial planning industry will struggle in their all-important start up years. Buying an existing business under a new financial services licence will mean no trail brokerage can be transferred, thus deterring the next generation of advisers to enter the market.”

Mr Tynan says new entrants will probably have to start their careers in institutions, because the costs of licencing, compliance and professional indemnity cover will be uneconomic in their early years.