Deep dive into client base valuations - and a comment on risk

We worked alongside Kurt Owen of Base to offer advisers insight into the factors considered when determining the value of an adviser’s client base and overall business. Click here to understand what does into an accountant’s valuation of a client base with input from a life insurance expert.

Please bear in mind that this is a framework presentation and the material in the presentation is illustrative only. The market has received some substantial shocks, and with new draft conduct law on the horizon, which appears to establish a framework that could ban commission, there are substantial risks in the medium term outlook. 

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Southern Cross Commission Changes

Several advisers have phoned or written to express dismay at the changes to service commissions by Southern Cross. The primary concern has been for the ability to provide effective service to customers under the new model. Secondary concerns have been the impact on adviser business valuations, which would appear to be significant. As it happens, I will be running a valuation seminar on the seventh of August, I shall cover the issues of service commission changes and agency agreement terms in more detail at that session. 


Opportunity to acquire substantial renewal book

There is an opportunity to acquire a longstanding respected business based in Northland with high level of diverse recurring revenue, two third from insurance business, and roughly one third from investment business. The investment fees are mainly derived from higher growth KiwiSaver funds. 

• Sole Adviser with office manager
• All records on X Plan – backed up on Cloud
• Risk persistency: 90% plus
• In-force premiums stable over last 5 years
• FUM growth over last 5 years
• Total annual recurring revenue $230,000

SECTOR and % of renewals
RISK                             29%
LEGACY                         2%
HEALTH                       39%
MANAGED FUNDS      11%
KIWISAVER                 19%
TOTAL                         100%

Excellent potential in the base – has been serviced but not sold to. Please call me if you would like to discuss the opportunity further.