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Australian Accountants and Financial Planners business models joining hands

| Tim Stewart

With ‘traditional’ referral arrangements no longer possible under FOFA, accounting practices are instead using a ‘joint venture’ referral model with financial planners.

In the past, accountants have received a cut of a commission or some other kind of “under the table” payment for a referral to a financial planner, according to Nicholas O’Donohue & Co senior associate Adrian Lynch.

Mr Lynch, who does M&A work for financial planning firms, said he has seen a relatively new trend of accountants referring clients to financial planning practices in exchange for a ‘slice’ of the clients’ value in a future sale.

“These agreements allow accountants to share in the capital growth of the financial planning practice to which they supply the clients,” said Mr Lynch.

“They usually work based on a simple understanding that the accountant will refer the clients and the planner will do the work.”

The planner is paid for the advice, but the value of the joint venture business is shared equally between the planner and the accountant, said Mr Lynch – thereby “creating a realisable capital asset for both parties”.

The referral model also allows accountants to benefit from the much higher valuation of financial planning practices, which tend to sit at around three times recurring revenue – as opposed to accounting practices, which are around 0.8 to one times recurring revenue, he said.

The joint venture model is a “smart way” for an accountant to refer that doesn’t involve taking cash up front, said Mr Lynch.

“I’m seeing more of it. As the two industries become more closely aligned, they’ll think a bit more cleverly about how to tie up those alliances,” he said.


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