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Multiples paid for client books dip

How much financial advisers can expect to sell a book of investment and superannuation clients for has decreased over the last two years, according to a new valuation report.

Radar Results has released its March 2021 price guide, highlighting a downward trend in the earning capacity for super and investment advice.

Recurring revenue multiples for investment and super clients (aged 80 years and over) declined to 0.8x-1x from 1x-1.2x compared to September 2019 figures.

For clients aged 65 to 79 years old, revenue multiples dropped to 1.7x-2.2x from 1.8x-2.3x.

For clients aged 64 years old and younger, earnings also decreased 2.2x-2.7x from 2.3x-2.8x.

Radar Results founder John Birt said financial advisers who have sold their clients and moved them off their AFSL can sell their AFSL, a process in which the buyer will acquire the company that owns the asset or the AFSL.

"Directors and shareholders are replaced, and usually, the existing Responsible Manager (RM) will remain in place unless the purchaser has an RM. Sometimes ASIC would like two RMs to be on an AFSL, adding more security," he said.

"The value of the AFSL will be determined by the approved services that are provided."

A "vanilla type" AFSL, which includes superannuation, risk insurance and financial advice, is valued at $20,000.

A vanilla AFSL with a managed discretionary account (MDA) facility would go for $50,000. Adding an options and derivatives trading capability to the latter would fetch between $80,000 to $120,000.

The firm, which also brokers accounting and mortgage broking firms, found that demand for accounting and loan books has shot up.

The short supply in accounting practices is garnering top prices from buyers, while mortgage brokers who wish to cash in on the trail commissions received from their aggregator can now get close to three times the annual trail, Birt said.

Read more: AFSLASICJohn Birt