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Financial Planners

Financial planers have been put under the microscope recently by the federal government senate enquiry into financial services.

The effect of the enquiry on financial planers has been in a shift away from trailing fee income from the lending institution to a business model built arround an annual fee charged to the client.

The trailing fee model which has traditionally been used may be radically restructured or may be phased out entirely.  Charging a customer an annual fee by a financial planer tends to result in the consumer subconsciously auditing the financial planner's value each year, whereas a hidden cost buried in fund managers annual percentage fee was less likely to be scrutinised by the customer.

This change is likely to make the financial planners fee base less "locked in ", which in turn suggests the earnings multiples previously achieved when financial planners businesses were sold may not be sustainable into the future.  

Business Valuer Network is adopting a cautious attitude when valuing financial planers because of this change in the industry.They are still excellent businesses and deserve a strong price for their goodwill contained within their client bases, but perhaps not as much as the three times to three point five times trailing fee income enjoyed during the fisrt decade of the 2000's.