Advice book valuations stagnate despite demand

Depending on the type of business they want to do, financial advisers looking to inorganically grow their client base will have to pay slightly more for a book now, but valuations have stalled overall, according to Radar Results.

In its latest price guide, Radar Results said demand for financial planning businesses continues to be strong, though there's been little change on the valuations front.

Its analysis shows a book of super and investment clients aged up to 64 has increased in value to a multiple of between 2.6x and 3.3x. This is up from the previous 2.5x to 3.2x.

For a book of clients aged 80 and over, the multiples have increased from between 0.90x and 1.1x to 1.0x and 1.5x.

And the multiples payable for clients aged between 65 and 79 also grew slightly to 2.3x to 2.8x, compared to 2.2x to 2.75x previously.

There are variables that impact the valuations though, Radar Results noted, like the location of the clients, funds under management or administration, and the investment products recommended.

There were no changes to valuations for risk clients or those charging SMSF administration fees. The highest multiples are attached to risk books with clients under 55 years of age, at up to 3.2x, while the lowest is for those under 61 years old at 1.8x at most.

Meanwhile, the report also indicated a shift in how larger financial planning businesses are being valued.

Radar Results said historically, most financial planning businesses were valued on a multiple of recurring revenue, and while this approach remains common for smaller client registers, larger practices are increasingly being assessed on profitability, scalability, and operational efficiency.

"EBIT-based valuations focus on a business's true earnings after expenses, providing a clearer picture of its financial strength. Buyers are looking closely at cost structures, adviser productivity, and the ability to generate consistent profits," Radar Results said.

"As a result, well-run businesses with strong margins and efficient operations are achieving premium valuations."

The firm said in the current market, EBIT multiples for related entities typically range from around 5.5x to 8.75x, with higher multiples achievable for "larger, well-structured or corporatised" practices.

"This shift reflects a maturing market, where buyers are not just acquiring a client base, but a sustainable, profitable business. For owners considering a sale, the focus is now firmly on building profitability and demonstrating a well-managed operation - not just on growing top-line revenue," it said.

Radar Results also highlighted increased demand for AFSLs over the past year, leading to an increase in prices.

Now, the sale price for an AFSL ranges across $20,000 to $100,000 or more depending on the authorisations attached.

It also noted that some buyers are insisting the Responsible Manager (RM) of the AFSL remain in place after settlement for up to three months. If it is required long-term by the new owner, the RM can request a nominal payment of up to $50,000 per annum to cover costs and time, it said.