Buying A Financial Planning Business

Buying A Financial Planning Business-53
Consider having a transition period with the previous owner of around 6-12 months.A big win is if the vendor offers to introduce you to the current client base and referral sources.The bank will have their own level of risk that they’re willing to bear when it comes to financing a business purchase but if the circumstances still don’t sit right with , you have to make the decision to either move on or see whether there are opportunities to turn the practice around.

You have to keep a compliance plan and update it on a regular basis as your practice grows and that’s not to mention the level of Professional Indemnity Insurance that you’ll be required to hold depending on the size on your current book of business.

If you’re independent and you want to refinance to a cheaper interest rate or you want to access working capital, you’ll may still be considered for finance!

If you’re one of the few independent advisers operating in Australia, you certainly have more flexibility and control in choosing investment products for your clients and following your own methodology when building an investment portfolio.

However, the trade-off is that you potentially carry a higher compliance risk and there are also higher costs in maintaining your AFSL.

Some lenders can be stricter when it comes to independent financial advisers and limit your borrowing to 50% of the purchase price of a practice rather than 70%.

They may also take a more conservative approach when assessing the renewable income and the EBIT of the client book that you want to buy.The experience requirement is also fairly strict, with the lender usually wanting to see 5 years industry experience with at least 3 years experience in a managerial role of a similar-sized practice.In addition, you’ll need to be in a strong financial position from a business and personal perspective which means you’ll typically need to provide your last 3 years business financials and your last two years personal financials.Today, you’ll see some client portfolios that are heavily-weighted with commission clients while others are heavily-weighted with fee-for-service clients.This is the reason that lending criteria is typically based on a combination of a proposed Loan to Value Ratio (LVR) EBIT.Also, find out what the practice’s compliance record is like.If the financial planning practice has poor client and staff relationships, it may not be a business you want to be involved with.You just need to show evidence of recurring revenue from your current book of clients and that you are RG 146 compliant as per the We can help you put together a financial planning practice loan application that highlights your strengths, including your financial position and the systems and procedures you have in place to meet your compliance obligations.Call us on 1300 889 743 or complete our free assessment form to speak with one of our mortgage brokers.Also, beware of vendors that refuse to provide these details as well as their last 3 years financials showing recurring revenue.It may be a clear sign to walk away from the deal or at least talk the vendor down to fairer price.


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