Advisers who have not made succession plans are putting their practices on the market hoping for big profits but ending up with fire sales, a business broker has warned.

“They will not get market value unless the adviser has put in plans for a sale,” Connect Financial Service Brokers CEO Paul Tynan told insuranceNEWS.com.au.

Changes to life insurance commissions and education standards from 2018 will exacerbate the problem.

“There are major changes coming for the old ‘lifies’, but they are still not thinking about the changes,” he said. “They have only got next year to think about it.

“Never before have I seen so many buyers trying to sell at such short notice, and retirement is the overwhelming reason for the sales. Depending on who you talk to, they will say – optimistically – it is either a buyer or seller’s market at present.”

Mr Tynan says there are buyers for old-fashioned life insurance businesses, which can command a good price, but some are sold due to older advisers facing health or personal issues and wanting a quick exit.

The staff buyout option is not always practical, he says.

The next generation of advisers is struggling financially with personal debt, including university fees, home loans and lifestyle expenses.

“They have no capacity left to entertain business ownership,” Mr Tynan said.

“Nor do they see a future for a practice with an outdated business model and an elderly client base they can’t relate to.”

Many advisers coming to the end of their careers have refused to adapt to modern planning practices.

“When the reluctance to change and modernise is combined with an emergency exit, the result is a succession planning disaster. We are now firmly in an era where change is the norm and it is only going to speed up.” 

Mr Tynan says industry associations have struggled to communicate the importance of positioning practices for exit and succession. 

“Breaking down the barriers and resistance to change is going to take an effort that goes beyond workshops and conferences.”