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July 6, 2017


Income Tax Rules for Buyers and Sellers | Queenston Consulting




PAST           —          PRESENT          —          FUTURE
In many ways the future is now or coming very fast. The financial advice industry has evolved exponentially the last 20 years. We have gone from about 80% of advisors being T4 employees to 80% owning their own business. Advisors dramatically changed their business model from a sales model to a more sophisticated business model. They effectively adapted to be successful.
Advisors are nothing if not resilient and creative. When CRM 2 was announced our phone was ringing off the hook with advisors saying there would be a mass exodus of advisors – selling and running for the hills. I said then and I say now – not going to happen. I have clearly been correct as advisors adjust their business model and continue to be successful.
I am sure there will continue to be government appointed wage earners who will continue to point their fingers at advisors and think they must be doing something wrong because they are successful. Advisors will continue to adapt and build successful businesses from hard work, great business plans and excellent sales and service processes. The clients will continue to benefit more than the advisors by receiving effective financial advice that is appropriately suited to that client and their family.
So what are the issues I see for advisors going forward?
  • Downward pressure on total fees or upward pressure on valued added service advice. What is your value added service process?
  • More transparency of fees – not just the fees of the advisor but also the fees of the mutual fund, proprietary pooled fund, etc. i.e. total fees paid.  What are the advisor’s alternatives to reduce total fees without losing revenue?
  • Potentially less revenue and more service equals an increase in the revenue to expense ratio. To combat this from hurting profits -your business is going to have to be more efficient and just as effective. Are you refining your business to address these potential issues?
  • The distribution companies (Dealers, MGAs, Exempt Market, etc.) are squeezing advisors for a larger share of advisor revenue.  In addition, they can and are cancelling sponsorship of advisors without the advisor having lost his license. Advisors are losing much of their power in the distribution chain. What are your alternatives to regain control of your business? Do you know your options?
  • Bigger will be better. Strength in numbers will become the mantra. A $500,000 business merging with another $500,000 business does not mean $1.000.000. It probably means a $1.25 to a $1.5 million business. There are economies and synergies that will increase the value. There are many other benefits from merging and acquiring businesses. Do you know the value of your business? The value of a potential acquisition?
  • To merge and/or acquire you must have your own financial house in order. Are you in a position to swap non-deductible debt for tax deductible debt? Do you have $200,000+ available to put down on that potential deal? Do you know where you will get it?
  • The majority of advisors are aging – average almost 60 – and should be preparing their business to sell (or buy on the other side of the equation), protecting the value in the event of death, disability or loss of license. Is your business prepped to buy or sell?
SOLUTIONS: include changing Dealers/Platforms to one that suits your business model; finding a Successor or being a Successor; merging/acquiring; team building – Queenston specializes in valuations, transitions, recruiting and consulting.
Do you have the answers to all of the above questions? Queenston does. We have experience working with in excess of 100 businesses – placing a value; recommendations on how to increase value and preparing our clients for the next step. Respond to this email for more information on how Queenston can work with you and your business.

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