Boosting the bottom and top lines post-GFC

With many financial planning practices finding it harder to write business following the GFC, there has been an increase in mergers and acquisitions of firms for a number of reasons.

On average, new business venue contributes about 30 per cent to gross venues – about the same number as profit margins. As a result, very few practices have been able to return to achieving those healthy pre-GFC profit margins.

Given this, acquisitions have become a highly attractive way of adding good revenue to both the top and bottom lines. So one of the trends we have observed is that those businesses which are not writing much new business are acquiring to improve primarily their top line.

Another trend we have observed is that some financial planning firms are bundling up their C&D clients and selling them off. There are a number of motives for this, and one of the main ones is FoFA readiness.

There are other financial planning businesses who are actively acquiring these books of business, which can be another good source of revenue. Given that there is an expectation that grandfathering will be favourable, acquiring businesses can see such moves as quite a valuable acquisition.