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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Practice Succession: Selling Your Firm is Not Easy

3 February 2014

I read with interest an article in Financial Advisor IQ about the Hard Realities of Selling Your Firm  http://www.financialadvisoriq.com/c/636884/72044

This global issue – a surfeit of sellers as baby boomer advisers begin to consider retirement – is mirrored here in Australia and many predict a downward pressure on the value of the practice.

The average age of an Australian financial planner is around 57 years and many principals need to consider practice sale or succession and plan for it. FOFA and a downward pressure on margins has been a focus for many practices lately. As a result there has been very little emphasis on optimising practices for sale or planning for succession.

There are so many factors to consider when a principal wants to exit the business – Is there a successor who will adequately service their clients? Can they realise enough to fund their retirement? Do they have options including Buyer of Last Resort or an institution that will purchase/takeover/ merge with them? A sound practice, run as a viable business is usually saleable. But it is a buyers’ market and having a strategic point of differentiation helps.

The case for practice succession planning is strong. It is a viable option and helps in the development and retention of younger advisers. Besides, a buy sell agreement can be funded through life insurance so that the family of the practice owner is protected.

Succession Planning cannot and should not be ignored.

Suzette Iyer.

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