The acquisition of an accounting firm by a financial planning practice is a beneficial strategy as the growth of the accounting base far outweighs the planning side, according to an industry business valuation director.
"When a financial planner acquired an accounting practice, the growth in the accounting revenue often exceeded that of the financial planning revenue," JNP Capital director Jason Phillips told InvestorDaily.
"The best example I have seen involved a firm growing an accounting fee base from approximately $250,000 to over $1 million in about four years, compared with the firm's financial planning base only growing around $200,000 during the same period."
Financial planners were able to organically grow the accounting base at a faster rate as the intimate adviser-client relationship meant they were able to refer and convert clients over to their accountants, Phillips said.
"If you had 100 unrelated clients, you would have a much greater chance of converting clients in the financial planning practice to the accounting practice than the other way around," he said.
"There's a greater take up of accounting services for financial planning clients so that's how they generate their growth, so if they go out and acquire, it could be very successful."
Fewer accountants held the perception that advisers flogged products and had recognised the need for clients to be serviced, making planners more aligned to accountants, he said.
"In the past, there was quite a bit of apprehension in the accounting market base to sell to financial advisers, but the world is changing and the Future of Financial Advice reforms will change that level of integration," he said.
"Financial planners are moving to a more fee-for-service environment not dissimilar to accountants. As they do that, the cultural alignment is going to be greater."
