Financial Advice New Zealand Panel on Succession and Valuation

Succession planning for your business and how to value it - Financial Advice New Zealand Session

There has been unprecedented interest in business valuation - that's not just about a few retiring advisers: it is also a valuable management tool, it enables funding lines to be established for acquisition, and helps to address governance priorities. In the last two years the approach to valuation has tended to change to reflect larger business sizes, more diverse revenue streams and the current economic conditions. You will hear about all of these and more, including feedback from the market about current valuation ranges. 

Joining me will be Kurt Owen, of BASE Accounting, Malcolm Powell a retired financial adviser. 

Our experts discuss why, when, and how businesses are valued. Key questions to be answered include:

  • When do you need a valuation?
  • What is the benefit of a valuation?
  • How do you decide if you need a renewal, business, or a joint valuation?
  • How can you use a valuation?

This will be valuable for anyone looking at selling or buying their business. Members free, others $50+gst

Register here

Accounting methods of valuation used for adviser businesses

There are multiple ways an accountant could value a business. These methods are detailed on the slide below along with some key questions or features of the approach. 

If you are interested in discussing how we value your adviser business in our joint valuation with BASE please express your interest to or


Multiple of renewals

Using a multiple of renewals is the most common method of valuation in use in the financial services industry at present for the valuation of life and health client bases. It is also Chatswood’s preferred method of valuation. Chatswood maintains a schedule of transactions which have been obtained in many ways. We record, source, comment on books, persistency, size of renewals, and comment on transactions. Our schedule is made up of both weak and strong sources.

Examples of weak sources include:

  • “I buy bases for”
  • “they are worth”
  • “I sold for”

Examples of strong sources include:

  • Transactions we were involved in
  • Sighted contracts
  • Regular buyers and trusted sources

If you are interested in discussing adviser business valuations, please express your interest to

Valuation modifiers

Although fluid, there are a set of modifiers that we use when assessing an adviser’s client base to determine the valuation range. The use of these modifying factors allows us to determine a realistic value of an adviser business client base.

Although there are many more factors that could affect valuation, they do not commonly do so. Of course, you may feel that a factor not listed is particularly important to you - in which case, it will become a criterion in your process. Also, this list is applicable to buying some or all of a client base in the current environment. Buying a Financial Advice Provider - or buying in to one - in a year's time will require consideration of a much broader set.

If you would like find out about our valuation service please express your interest to


What really affects a multiple of renewals?

Although 4 times is usually taken as an industry standard, not all “4 x” are equal. The difference can be accredited to things like:

  • Cash now with mechanism for claw back issues
  • Documentation - especially of privacy and scope of service issues
  • Age of clients
  • Products
  • Persistency
  • Problems of enforcement affecting deal structure           
  • Cash and shares mix

Other factors that affect the multiple of renewals include:

  • X factors - such as brand, referral deals, and technology
  • Bargain basement factors - such as a poor reputation, location, or form of lock-in to an unpopular product provider
  • Age and type
  • The product mix

Increasingly, issues that relate to compliance under the new regime are being named, but these appear premature, as no-one is yet in the market to buy a Financial Advice Provider.

We record, source, comment on books, persistency, size of renewals, comment on transactions – and have dozens from the last two years to generate a range of multiples.  If interested, feel free to email your interest to


Assessing adviser business - going concern or client base sale?

A profitable adviser business will be viewed as a going-concern. But what is profit? In our view it is only the surplus after economically valid sums for cost and the owner's salary are deducted. This view suggests that the business will continue to operate and not be forced to liquidate or discontinue operations, and is of sufficient scale to be considered a business. The joint valuation service Chatswood completes in conjunction with BASE prepares a valuation report based on a going concern. If interested in discussing further please contact or

When valuation of client base or whole business is useful

We offer a basic client base valuation, and a more complex business valuation service in conjunction with a chartered accountancy practice, where we supply the specialist industry knowledge. A valuation is useful if you are looking to:

  • Sell
  • Buying out
  • Succession planning
  • Borrow from the bank
  • Transfer shares into a trust

Or if you are going through:

  • Shareholder/partnership disputes
  • Divorce/separations


Expected recurring revenue multiple for Australian client bases

Radar Results Marketing created a summary of over 130 financial planning practices and client registers from the past six months to September 2019.  The summary outlines the recurring revenue multiples for the different revenue types.  As stated in the table below, advisers looking to sell, can expect to sell their client bases from 1.0 times to 2.8 times their recurring revenue. It is worth noting that these multiples apply to client bases where the annual revenue is up to $1 million AUD - reinforcing the view the the multiple of renewals method is applicable mainly to smaller businesses (under five people) rather than more substantial enterprises. For those constantly surprised why small businesses of this type can command values as high or higher than these then the answer is simple - because of the arbitrage between the values for these businesses, and those for larger advice businesses. 


Thanks to valuation seminar attendees - and next workshops

It was great to spend time talking with advisers in Hamilton about business valuation. Extending beyond the multiple of renewals approach we were joined by Kurt Owen of BASE who talked through different accounting models of valuation. We also got into some of the details debating the value of data, clients that won't schedule reviews, level premiums, spread commission, and a range of risks. Whether you are buying, or selling, or just need to establish a good valuation framework for management and shareholder purposes, valuation approaches are worth exploring. Transaction structure matters too - to both parties and the business outcome of the process. Call us if you would like to talk it through. Check out links to our workshops in Christchurch, and Wellington

What valuation track is your advice business on?

For those already registered, here is a sneak peak into the content we will be discussing at our upcoming adviser business valuation seminars. If you have not already registered, register for our Tauranga, Hamilton, Christchurch and Wellington seminars on eventbrite to ensure that you are part of the interactive seminar that explores an accounting method of valuing a business as well as looking at a multiple of renewals approach of valuing an adviser business.

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