Hayne commission shaking up smaller risk firms

According to analysis from Radar Results, firms with $100,000 to $200,000 or recurring revenue fear the findings of the royal commission may shake up the market.

It noted the incoming FASEA requirements are also scaring advisers into making an early exit, as well as the lower up-front commission system and the new two-year clawback period for commissions.

As a result, prices paid for smaller risk books move between two and three times the annual recurring revenue.

On the larger end of the market, Radar Results said large risk insurance businesses with between $1 million to $3 million in annual recurring revenue can command far higher multiples.

It found buyers of these large risk businesses last year were funded at an average multiple of more than 3.5 times the recurring revenue.

“Some banks have said that they can’t lend enough money to financial planners for acquisitions, but unfortunately, they have also increased the minimum loan that they will approve to $1 million,” Radar Results said.

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].