How to maximise your practice value through good will. Good will can make a significant difference to the sale price of a financial planning practice, according to Mark Ballantyne, general manager of Financial Wisdom. In a recent No More Practice blog, he said practice valuations are often thought of as a multiple of recurring revenue, but they are really about customers and customer relationships. “Good will is all about traffic, or the ability for clients to come back into your business and the ability for new clients to come into your business,” he said. “To get the best price for your business, the real difference is in the good will – why your clients like you, why they come back to you and why they are prepared to refer you.”
Advisers expect profits to increase. Seven out of every 10 financial advisers expect to increase their profits during the next 12 months, according to the Macquarie Practice Consulting Benchmarking Survey. It also found that boutique Australian Financial Services Licences were more profitable on average than dealer group practices, while adviser client numbers have generally been stable over the past few years. However, the survey suggested that limited client base growth may suggest firms are now struggling to attract and service more clients and a new approach to client acquisition may be required.
Accountants’ exemption in the wings. The Federal Treasury recently indicated that accountants will be included in the Future of Financial Advice (FOFA) reforms, with the Government considering Financial Services Licences for accountants who provide self-managed superannuation fund advice. Money Management recently reported that the Government intended to move on the licensing issue so that accountants would benefit from the FoFA reforms. “Once its finalised there will be an obligation for them to be licensed and fall within the jurisdiction of ASIC and provide some basic information to people,” a Treasury official said.
Cormann on FoFA: “the bad bits are really bad”. The Federal Government’s Future of Financial Advice (FoFA) reforms will increase complexity, unnecessarily increase red tape and increase costs – with little or no additional consumer protection benefits, according to Shadow Minister for Financial Services and Superannuation Senator Mathias Cormann. Speaking at a recent AFA event, he said the “bad and contentious bits of FOFA” exist because the Government is pursuing “an ideological vested interests agenda”. “You all know what I’m talking about – this Government is particularly close to one segment in the financial services market and they’re pursuing their agenda in order to give them a leg-up in what is a competitive marketplace,” said Senator Cormann.
Government urged to extend MySuper compliance timing. The Federal Government should amend the first tranche of its MySuper legislation to provide employers with a one-year transition period, according to the Association of Superannuation Funds of Australia (ASFA). In a submission filed with the Treasury, ASFA said compliance with the MySuper reforms will necessitate considerable changes to a mature and complex superannuation system. “The FOFA, SuperStream and APRA reporting reforms also have a significant impact on a number of superannuation funds,” ASFA said in the submission, which claimed superannuation trustees would experience complex and costly system changes if the MySuper compliance date was not extended from 1 October 2013.
Super funds look to long-term lenders. Superannuation funds are turning to dedicated long-term lenders as the major banks shift away from commercial property lending, according to Michael Holm, executive director, Balmain Investment Management. Financial Standard reports that the only source of capital for a commercial property borrower is the four major banks, and Holm said the effect of Basel I & II combined with APRA regulations make it much more difficult for the banks to lend long-term in non-residential sectors. As such, commercial property lending suits superannuation funds because they can handle long-term investments, said Holm.
Equities to outperform other investments. Australian and international equities are expected to outperform other asset classes over the coming 12 months, according to The Financial Services Council Chief Investment Officer Investment Index. It found that the majority of CIOs expect Australian equities to perform well, while CIOs do not expect much movement in property and most have a neutral view of domestic and international property. The index also found that lower sentiment for international and domestic fixed income is dragging heavily on confidence, to the extent that overall investment sentiment is slightly negative. While slower Chinese growth remains a concern, most CIOs see this as a risk over the coming five years rather than the coming 12 months.
Investors continue to focus on stable income. Investors are continuing to focus on stable income instead of capital growth as a result of ongoing market volatility, according to GBST Broker Services and Financial Services. Financial Standard reports that volumes are low both in the institutional and the retail investment sectors in the current investment market. There has also been an increase in demand for hybrid securities which shows that investors are now looking for income above and beyond capital growth, according to Denis Orrock, CEO at GBST Broker Services and Financial Services. It was also important to acknowledge investor fatigue and the fact that the market will take some time to pick up, he said.