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Financial planner needing some advice!

Discussion in 'Financial Planning' started by Bebe, 5th Jul, 2010.

  1. Bebe

    Bebe New Member

    Joined:
    5th Jul, 2010
    Posts:
    2
    Location:
    Melbourne
    Hello everyone,

    I am currently a financial planner working for a bank and am considering starting my own FP practice.

    I am currently talking to a few licencee's with the major one being MLC and i am thinking of buying a client register for a multiple of 3 times the reoccurring revenue.

    I have about 6 years experience in the industry and am 27 years old and i need advice/help on what other people think about the do's and dont's of buying into a client register (whether it be MLC or AMP).....any help/discussion would be great!

    Thanks
     
  2. CJ. Wentworth

    CJ. Wentworth Well-Known Member

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    9th Mar, 2008
    Posts:
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    Location:
    Cairns, QLD
    you may need to re-read the OP. They ARE an FP, don't need FP advice
     
  3. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
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    Location:
    Sydney, NSW
    Hi Bebe,

    With the changes coming in from 1st July 2012. What do you think the multiples of buying a business will be after then?

    Cheers,

    Dan
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Location:
    Sydney, Australia
    Is a multiple of 3x normal for this industry?

    What is the breakdown of that revenue? How much is from commissions and how much from fee-for-service?
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Sydney, NSW
    Hi Sim,

    Commissions, from a combination of insurance and investments.
    Fee for service is hard to become recurring when there is no goodwill.

    This may indicate a reduction of multiples, eg, accounting practices usually sell for around 1x multiples as these practices are essentially doing tax returns which are paid for once the work is complete (fee for service).

    Cheers,

    Dan
     
  6. Dolfinwise

    Dolfinwise Well-Known Member

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    30th Sep, 2009
    Posts:
    47
    Location:
    Brisbane
    Client quality

    Its all about the quality of the base. 3X is fine even with legislative uncertainty if the client base is engaged, knows what fees they are paying and believe they are getting value for money.

    If its mainly passive revenue and most clients are just policy holders with no connection to the firm then you would be mad to proceed.

    I would consider buying into an existing quality practice to reduce your risk and make sure your shareholder/partnership agreement allows you to leave with your share of clients if it doesn't work out.

    I would also at 27 not rush. Waiting for the legislative environment to settle down would not be a bad move at this point in time. You will have many opportunities.
     
  7. Dolfinwise

    Dolfinwise Well-Known Member

    Joined:
    30th Sep, 2009
    Posts:
    47
    Location:
    Brisbane
    Recurring fees

    I would dispute fee-for service payments cannot be recurring.

    I run a practice where nearly all my revenue is paid by clients directly via cheque.

    These cheques are written every year with rarely a client not opting for re engagement.

    It all comes down to a businesses' ability to consistently add value.
     
  8. Michael Ord

    Michael Ord Mr

    Joined:
    23rd Feb, 2010
    Posts:
    5
    Location:
    Toogoom, QLD
    Hi Young business man,
    I set up my own practice a year or so ago and there is a lot to work through. The reoccuring revenue stream is tempting, to keep the ball rolling in the early days but think about at what cost 3x? I doubt either dealer group is offering the sale of any book without being aligned to them, the devil is in the detail. Use someone reputable like Kenyon Prendeville in the process. Likewise if you have the money you may want to take a step back and say to yourself with all the proposed changes would you be better off doing the hard yards building your own book from scatch, with your choice of dealer group and your choice of renumeration (for now)? Any way best of luck and go get em!!!!
     
  9. Lloyd Harris

    Lloyd Harris Member

    Joined:
    27th Feb, 2010
    Posts:
    15
    Location:
    Gold Coast, Qld
    Hi Bebe,

    Strongly suggest that you look into the AMP Practice Start Up Offer. Cost of the book is 4x (expensive) but AMP guarantee to buy it back off you for 4x also. Recurring revenue with respect to investments is based on a notional figure also (40bps) rather than actual trail.

    Cash flow assistance is provided in first year, and book revenue exceeds interest only loan. Works out to be about $45k in your pocket before you write any new business.

    No I don't work for AMP! But, I am in an almost identical situation to you (bank planner, 26 year old, 7 years experience).

    Importantly, you don't need $250K equity like the AXA offer (which I'm not sure about you, but is an issue for me given my age).

    It's a big step moving into your own business. Congratulations for having the confidence to take that step!

    Cheers, Lloyd.