Accountants who add SMSF financial advisory services will not only increase their current revenue streams, but will also reap the benefit of being able to attract a higher selling price for their practices when they are ready to retire, according to the head of a large financial services firm.
Based on real-life evidence, Count Financial chief executive David Lane told attendees at the selfmanagedsuper CoreData SMSF Accountants’ Day in Sydney on Friday an accounting practice could more than double the consideration it would get when the time came to sell if it had incorporated financial advice in its client offering.
Lane said a many firms operating under the Count banner started off as pure accounting practices, but later decided to add the provision of advice, which provided significant benefits both in the medium and long term.
Using a typical scenario he had witnessed, Lane said accountants earning $1 million of revenue a year from traditional accounting services could typically earn significant additional yearly income from financial advisory activities.
“What we’ve found once the accountant has become independent is they say the client is now asking for financial advice, so let’s provide it. And when they do that, five years later when their business is growing, as well as $1 million, they can generate about $500,000 in advice revenues,” he said.
“And that $500,000 in advice revenues comes from almost entirely existing accounting clients.
“So now they’ve got $1.5 million in revenue per year and if you fast forward to when they are ready to retire and they’ve still got this $1.5 million in revenue per year, what does it mean?
“Well they can sell the $1 million accounting revenues for $800,000, but financial advice revenues sell for 2.5 times, so they can sell that for $1.2 million. It means they’re going to get just over $2 million on those assumptions, and they’re reasonable assumptions, for the same business, for the same clients.”
He pointed out the decision was not purely about making more money from the practitioner’s perspective, but also about servicing clients better.
“The clients are better off because you’re providing more services, that is, services they want and they need, and you’re better off because you’ll have stickier and a more valuable business,” he said.
“To me, to a large extent, that win, win, win is a key part to why I see this as a huge opportunity.”
