Portland, Ore. (April 15, 2003) - The economy may be shaky, but the market for financial advisory practices is stronger than ever, according to Business Transitions Publishing Inc.’s 2003 Practice Transitions Report.
While the stock market has taken a plunge, the median selling price of advisory practices climbed almost 12 percent over a two-year period, to $432,000 in 2002, up from $387,000 in 2000 and from $409,000 in 2001, Business Transitions reported. The ratio of buyers per seller is up 25 percent, average inquiries per seller are up 50 percent, and the average down payment is up 17 percent. The report is based on data from the FP Transitions listings of 2,166 buyers and 142 sellers in 2002.
While the continuing bear market is driving some advisors out of the industry, it’s driving many more to grow their practices through acquisition, according to the report. And sellers in down markets get an added boost because most practices are sold on an earn-out basis, where the buyer typically pays between 25 percent to 30 percent of the purchase price up front, and finances the rest over time, and their depressed revenues are more likely to increase in the next three years or so than in boom years.
The average age of sellers is also falling, due to greater numbers of younger planners wanting out of the business, while the average experience of buyers is increasing, Business Transitions said.
-- WebCPA staff
