Get real, get ready – ING consultant warns advisers

Up to one in five financial advisory businesses could see their value halved by December this year compared to the same month in 2007, according to a new paper published by the ING-associated Strategi group.

Tuesday, January 13th 2009, 7:03AM

by David Chaplin

The paper titled Facing the new reality, authored by Strategi head, David Greenslade, claims the year ahead will be tough for many financial planning firms that have not adopted appropriate business structures.

Greenslade says in the report that many financial advisory businesses have already slumped to a “breakeven situation” with revenue predicted to drop by up to 20% during 2009 while expenses are also expected to increase.

“Many financial advisory businesses have already entered a financial recession of their own. Positive steps need to be taken quickly to prevent an advisory business moving from a ‘recession’ to a ‘depression’, or worse to failure,” the Strategi paper says.

The report says businesses that depend on a single source of revenue, particularly investment-only firms, will suffer most in the year ahead with many financial planning practices picked to move from profit to loss in “a matter of months”.

According to the Strategi study, many financial advisory practices that failed to restructure during the good times could be forced to sell out when “business values are at an all time low”.

However, the report suggests financial planning firms still have a limited amount of time to prepare for the hard times to come.

“A business should not wait until it is cash flow negative, before implementing changes. For many businesses, the first three to four months of 2009 will be the key time during which to make the necessary restructuring decisions,” the Strategi paper says.

ING (including its subsidiaries and partners) is Strategi's “sole permitted financial services client” in New Zealand, the firm's website says, to which it provides “adviser consulting services and the broker-dealer management and services”.

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