After 40+ years in the FP profession an experienced Melbourne advisor plans to reduce hours and step down from licensed advising. The tightly held business is successfully operated by the advisor and his wife who works with him 15-20 hours per week.
The vendor had previously been a partner in a 20-year practice with its own AFSL and up to four additional advisers in the firm.
The income of the practice is made up of (ex-GST):
- Fee for service $233,000 p.a. (mostly fixed dollar amount with 4% indexation)
- Insurance renewal commissions $34,000 p.a.
- Annual consultative work $45,000 p.a. estimated.
Total annual Income of the business is $312,000.
Methods of fee payments by clients are mostly through platforms and life/disability insurance renewal commissions.
There are around 170 clients in the business. About 95% of the clients are located in Melbourne and Sydney with a small number in Queensland and WA.
The make-up of the client base is PAYG, Professionals, Self-Employed, Retirees, Accumulators, Ordinary families, Tradies, Property, Share traders.
The clients’ age brackets are:
| Under 40 | 8% |
| 40-55 | 42% |
| 55-60 | 9% |
| 60-70 | 28% |
| Over 70 | 13% |
60% of the clients are under the age of 60
The records storage system is composed of:
- AdviserLogic CRM in the cloud
- Microsoft Office 365 in the cloud
- Astute Wheel in the cloud
Platforms in use:
- Asgard Infinity eWRAP (legacy), BT Panorama, Netwealth (preferred for new business), Insignia Expand, AUSIEX ASX shares, Macquarie CM account, Australian Unity (ex-IOOF WealthBuilder), Generation Life, Colonial FirstChoice (legacy) and Perpetual WealthFocus (legacy).
- Complete Super Solutions for SMSF administrative services.
Referrals. The existing client base comprises a number of Centres of Influence who have referred friends and family over the years. Other opportunities exist to develop further referrals sources
The main insurance product providers are:
- TAL ~$42,800 annual premium (mostly @ 20% renewal – 10 policies & 6 individuals)
- Asteron (now TAL) ~$20,300 annual premium (5% renewal – 1 individual)
- TAL/IOOF SMSF ~$4,000 (@ 20% renewal – 2 individuals)
- AIA ~$106,800 annual premium (mostly @ 20% renewal – 14 individuals)
- Onepath (now Zurich) ~$15,800 annual premium (between 5%-10% renewal – 3 individuals)
- Comminsure (now AIA) ~$18,000 annual premium (@ ~5% renewal – 2 individuals)
- Asgard Risk ~$32,000 annual premium (@ ~5% renewal – 5 individuals)
- Colonial FirstChoice ~$9,000 (0% renewal – 2 individuals)
- MLC ~$15,000 annual premium (5% renewal – 2 individuals)
- BT Panorama ~$920 (0% renewal – 1 individual)
Much of the life cover is in SMSF’s for the HNW clientele. Reviews are required.
FUA is circa $45 million as follows:
- ~$8.4 million – Asgard (22 individuals, 25 of 48 active fee accounts listed producing $57K annual fee revenue)
- ~$270k – BT Panorama Super (1 individual – invoiced directly)
- ~$12.4 million – Netwealth (48 of 53 active fee individuals, 59 accounts listed producing $120K annual fee revenue)
- ~$4.83 million – Insignia Expand (6 of 28 active fee individuals, 28 accounts listed producing ~$22K annual fee revenue)
- ~$3.3 million – AUSIEX and Capital 19 online platforms (17 individuals – charging brokerage and/or direct invoicing as necessary)
- ~$1 million Macquarie Cash Management account (50 accounts listed of which 10 are inactive clients – $2.1 million in total accounts’ FUM)
- ~$12 million – non-platform/direct investments (est. 25 individuals – charging brokerage and/or direct invoicing for ongoing advice)
- ~$470k – Perpetual WealthFocus and Colonial FirstChoice – no ongoing fees – charging brokerage and/or direct invoicing as necessary)
- ~$2.123 million – ING Living Super legacy accounts (84 individual members & accounts – no ongoing fees – charging brokerage and/or direct invoicing as necessary)
- ~$420k – Australian Unity (ex-IOOF WealthBuilder ~$272k FUA), Centuria Life (~$60k FUA) and Generation Life Investment Bonds ($91k FUA) 12 individuals – no ongoing fees – charging brokerage and/or direct invoicing)
Terms of Sale Considerations:
- Multiple of the annual income required: 33
- Breakdown of payments 1 – upfront 80%.
- Breakdown of payments 2 – at 15 months 20%
- Fee revenue split would be mutually convenient during 2 to 3-year client transition period for new business.
The following are the opportunities for potential reviews:
- Continued cross generational referrals.
- Estate Planning and intergenerational wealth transfer opportunities.
- Super amalgamation opportunities – a number of super fund members should be engaged for reviews, tax-effective accumulation and additional income replacement/insurance planning strategies.
- Self-Managed Super establishments and Estate Planning (Astute Wheel Estate Planner) for separate fee invoicing.
- Finance/Mortgage broking and equipment leasing referrals. The practice has, in the past 15-20 years, referred millions of dollars in loans to its panel of brokers.
- Investment property referrals – traditional residential and commercial as well as high-yield SDA/NDIS and co-living properties. We have access to a large number of DIY property investors and preferred equity money partners who are likely to be good insurance and tax-planning prospects.
- ASX and international shares through the Netwealth platform.
- Accounting referrals. The practice has, in the past 15-20 years, referred in the order of $350,000 in annual fees to its panel of accountants, lawyers and finance brokers.
- Aged Care is a growing area of enquiry for separate fee invoicing.
- General insurance would be an opportunity to refer clients. The practice hasn’t been very active in this area.
Transition period/continued client liaisons:
- The Practitioner is willing to act as a business/lead generator/client relationship officer for up to 5 years after the sale.
- The Practitioner will be active in a business mentoring and networking program. Should be the source of new referrals.
- A Keyman insurance benefit is in place if the Practitioner dies in the interim.
- Clients are comfortable with Zoom/video meetings.
Preference will be given to acquirers with approved funds rather than a contract with “subject to finance” conditions.
Full disclosure of relevant figures will be provided on signing of an NDA