The usual approach to this has been, "I have a book of clients, and I'll sell it for X times the annual renewals", and for many, that works just fine.

However, for those that haven't managed to establish a large client base with significant renewals, the reality of X times the annual renewal just doesn't go very far in terms of retirement.

Ideally, these advisers will have had other wealth strategies along the way, but not all.

I'm talking about those that face client base sale values in the $200-400,000 range.

Where I'm coming from here is just because that's how we have always done it doesn't mean that's how we should always do it.

And this is where our licensing rules now give us a different perspective.

• Who says the base has to be sold?
• Could that base be 'leased' as such?

The reality is the base has to be located under an operating FAP and looked after by qualified and registered advisers with the new rules.

However, that doesn't preclude the owner of a client base from contracting a FAP to look after and manage those clients.

This is an interesting perspective when you dig into the various contracts and agency agreements.

• The reality of agency agreements is you don't "own" the client as such.
• Sure, you own the rights to talk to that client and receive remuneration from the insurer for them, but you don't own them.
• The insurer "owns" the client; they are the ones that hold the contract with the client, and the insurer is the one that receives money from the client and pays claims for the client.
• This means that the contract through the agency agreement mainly defines the adviser responsible for looking after those clients unless the client signs off to have another adviser look after them.

And that's ignoring the client's view that no one owns them!

Where am I going with this?

The primary concern of the FMA is clients are looked after.

• By a qualified, registered financial adviser operating under a Financial Advice Provider License.

This doesn't preclude various ownership structures for client bases in the background between the FAP and the original retiring adviser or even an active adviser looking for servicing support in their business.

Which then raises an interesting approach. We know that client base purchases are capital intensive, and older average age bases have a run-off risk higher than a middle-aged base would, resulting in retiring adviser bases having some downward pressure on values because of the more significant drop-off risk.

The existing adviser also has overhead and operating costs, expenses they bare just turning up, and more for doing the work themselves.

This raises the question if you could contract an advice firm (FAP) to service your base for a fee from the remuneration it generates, and that residual remuneration is still a reasonable ongoing income stream, Why would you sell for X times vs having that income stream potentially come in for 15, 20, 25 years into the future?

We have an interesting storm converging on client bases at the moment, and it is likely to remain for many years.

1. The economic climate to access funding is challenging;
2. The increasing number of bases coming up for sale with Boomers retiring;
3. Without the younger ones coming in as quickly as the Boomers are leaving to replace them.

Being that the funding issue is not helped by the younger ones struggling to get on the property ladder in the first place, their opportunity to purchase client bases will also be delayed.

If retiring advisers are to continue to receive the value of their life spent building their client base as they expect, we need to start considering alternative ways of doing this.

Ways that don't result in crashing the value of client bases or diminishing the value of a significant asset in advisers' lives.

I've been turning this over for some time, and I'm interested in discussing some of these approaches with advisers to better support those that have paved the way for us to continue in this profession.

We stand on the shoulders of giants, and we need to look after adviser well-being, not just while they are working but consider it for retirement too.

I also believe that continued consolidation of client bases with large corporatised FAPs isn't good for those of us who want to operate a more targeted or boutique advisory business.

It may make life easier for the FMA to manage things, but it doesn't help consumers or competition in the industry.

Food for thought at a time of change for many.