Advice practice valuation gap priced at $1.1m

Financial advice businesses have an estimated $1.1 million valuation gap, a new survey from Colonial First State (CFS) shows, as most advisers are not prepared for the planned and unplanned sale of their practices.

- Karren Vergara

The Hidden Value Report, produced in conjunction with Succession Plus, surveyed 116 practices which on average generate $2.71 million in revenue, while annual profit reported come to $848,781.

The survey found that the value gap was lower for businesses with fewer employees and lower business revenue.

For example, practices with less than $1 million in annual revenue had an average value gap of $269,109. Practices with more than $3 million in revenue had an average value gap of $2.7 million.

Of the total businesses benchmarked, 58% had a value gap of more than $500,000. Half of them had fewer than 10 employees and 18% had revenue of less than $1 million.