Everybody is a potential seller or buyer

01 August 2012 Esmé Davies, Celestis

In a recent article, titled Making your Practice Succeed, we touched on the results of a Celestis succession planning survey and highlighted important issues facing most financial advisory practices. I would like to revisit these issues and comment on the results of a similar US-based survey undertaken this year by NFP Adviser Services Group and Aite, an independent research company.

Our survey revealed that fewer than 20% of respondents had a documented succession plan. This statistic is alarming given the average age of South African advisers is around 50 years at present. Aside from the fact that your practice may assist you in securing retirement capital, the lack of a business continuity plan could result in serious difficulties for your family, employees and even clients in the event of premature death or disability.

This situation is not unique to South Africa. The US survey revealed that approximately 10% of the respondents were over 60 years old and that only one third of practice owners had a succession plan in place.

More buyers than sellers

At the time of our survey, we were very surprised that there were so many potential buyers of client books and/or advisory practices. We believed that the then upcoming education requirements coupled with further legislation and the relatively high average age across the industry would have resulted in many more sellers than buyers.

Our survey revealed that at least 40% of respondents were potential buyers. And since then, our fspExchange website (that assists potential buyers and sellers to meet anonymously), reflects a ratio of no less than four buyers to every seller. It will be interesting to see whether the close off date of the Regulatory Examinations will change this picture.

Finding the right fit

Most practices would prefer to transfer ownership to another adviser within the practice, but few have this luxury. How do you go about finding a successor? From our survey, most sellers are looking for someone who will have their clients’ best interests at heart. The US survey supported this thinking, with 53% of practice owners stating that "finding a successor who is a good fit” is the most pressing problem.

Next on the list of considerations is "obtaining a fair price”, followed by "finding a successor with the necessary funding power” and "implementing the transition”. South African sellers concern themselves with finding "buyers who support similar product providers and product lines”, "buyers making use of similar CRM systems” and "buyers willing to pay a fair price”.

Where to start looking?

If you know what you want, as a seller or a buyer, where do you start looking? Several product providers, adviser associations and networks have put together databases in an attempt to make it easier for like-minded advisers to meet. Another potential solution is to entrust your business to one (or more) of the many business brokers who operate in this market.

You can also make use of one of our latest initiatives: Just log on and make things happen for yourself!

The issues discussed in this article prompted us to investigate creating a market for the trading of independent financial advisory practices and client books in South Africa. We launched fspExchange in association with FAnews approximately 10 months ago with good results. It allows anonymous buyers and sellers to meet one another in a safe and secure environment. Information can be released to interested parties at your discretion.

Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now