On this page
- The short answer
- What "recurring revenue" actually means here
- Why the multiple is only a starting point
- The eleven things that move the number
- How the ranges differ by book type
- Worked example: a mixed book
- Price is not the same as value
- You do not have to sell all of it
- Getting a number for your own book
- Frequently asked questions
Most advisers who ask this question are not trying to sell tomorrow. They are trying to work out whether the thing they have spent twenty years building is worth what they hope it is worth.
The short answer is that a New Zealand financial advice client book is usually valued as a multiple of its recurring annual revenue, and the multiple depends mostly on what kind of revenue it is.
The short answer
These are the indicative ranges we are currently seeing in the New Zealand market.
| Book type | Indicative multiple | Applied to |
|---|---|---|
| KiwiSaver | 4.0×–5.0× | Recurring annual revenue |
| Life & health | 3.5×–4.5× | Recurring annual renewal revenue |
| Fire & general | 2.0×–3.0× | Recurring annual revenue |
| Mortgage | 1.5×–2.5× | Recurring annual trail revenue |
Indicative only. Actual market value can fall above or below these ranges depending on the characteristics of the client base, transaction structure and buyer demand.
So an adviser with $200,000 of recurring life and health renewal revenue is looking at an indicative range of roughly $700,000 to $900,000 — before anything is known about the clients behind that revenue.
The gap between the bottom and the top of a range is usually around 25 to 30 per cent of the price. On a book of any size, that gap is worth more than most advisers expect, and it is decided almost entirely by things you can influence.
What "recurring revenue" actually means here
This is worth being precise about, because advisers use the phrase two different ways and the difference is a factor of four.
When an adviser says they have a "$1 million book", some mean $1 million of recurring annual revenue, and some mean a book they believe is worth about $1 million.
On this site the multiples always apply to recurring annual revenue. A book producing $250,000 of recurring KiwiSaver revenue sits in the $1m–$1.25m range — it is not a "$1m book" in the revenue sense.
The revenue figure a buyer works from is also narrower than a gross income figure. It generally excludes:
- upfront or new-business commission
- one-off advice or plan fees
- revenue from clients you are not selling
- anything already known to be ending
What is left is the part a buyer is actually purchasing: the income that continues after you stop working on it.
Why the multiple is only a starting point
A multiple is shorthand for a judgement about how long the revenue will last and how likely it is to survive changing hands. Two books with identical recurring revenue can be worth materially different amounts, and in practice they usually are.
A buyer is not paying for what your book earned last year. They are paying for what they think it will still be earning in five years, under someone else's name.
That single sentence explains almost every valuation factor below. Anything that makes the future revenue more predictable pushes the multiple up. Anything that introduces doubt pushes it down.
The eleven things that move the number
Retention and persistency
The most important one, in every book type. A buyer paying 4× is paying four years of today's revenue in advance; if a tenth of it disappears each year, the arithmetic stops working. Advisers who can show what their retention has actually been, rather than assert that it is good, are in a much stronger position.
Client demographics
Age profile drives expected relationship duration. In a KiwiSaver book younger clients mean decades of contributions ahead; in an insurance book they mean a longer expected policy life; in a mortgage book they usually mean larger balances and longer remaining terms.
Revenue quality
Stable, repeatable revenue is worth more than revenue that moves around for reasons nobody can explain. An unexplained decline is more damaging than a small one that has an obvious cause.
Client concentration
If losing five clients would cost a buyer a third of the revenue, that is a different risk from a book where the same five clients are five per cent of it.
Provider or lender concentration
Not automatically a problem, and sometimes an operational advantage. But a buyer will want to understand whether the arrangement transfers, and what happens to the revenue terms if it does not.
Adviser dependence
Relationships that exist only because of you personally are the hardest thing to sell. The question a buyer is really asking is whether the clients belong to the business or to the individual.
CRM and data quality
Under-rated, and the cheapest thing on this list to fix. Incomplete data forces a buyer to make assumptions, assumptions are priced as risk, and risk comes off the multiple.
Transferability
Whether the revenue can actually be moved — contractually, operationally and practically — and how much work that will take.
Revenue growth
A book that has grown organically is more attractive than one that has been held flat by constant new-business activity, because the buyer is purchasing the existing clients, not your ability to find new ones.
Transition support
A seller willing to make introductions, co-sign a client letter and stay available for a defined period reduces the buyer's single biggest risk. It is often worth more to the price than anything else you can offer.
Buyer demand at the time
The least discussed factor and not one you control. Which buyers happen to be actively looking for a book like yours, in your region, at the size you are selling, affects the number as much as several of the factors above.
How the ranges differ by book type
The four ranges above are not arbitrary. They reflect what happens to the underlying revenue over time.
Mortgage trail is the lowest because it amortises: the loan is repaid, and the trail goes with it. KiwiSaver is the highest because the opposite happens — contributions continue, balances compound, and a retained client base can be producing more revenue in ten years than it does today. Insurance sits between them, where a policy can stay in force for decades but can also lapse in a month.
Each book type is assessed on its own characteristics:
- How much is a KiwiSaver client book worth in New Zealand?
- How much is an insurance adviser client book worth in New Zealand?
- How much is a mortgage trail book worth in New Zealand?
If your book is mixed, this matters more than it first appears. Applying a single blended multiple to a book containing mortgage trail, insurance renewals and KiwiSaver revenue will usually undervalue part of it and overvalue another part. Each revenue stream should be identified and assessed separately, and then the client relationships considered on top.
Worked example: a mixed book
Example only
- Recurring KiwiSaver revenue
- $80,000 × 4.0–5.0
- Recurring life & health renewal revenue
- $60,000 × 3.5–4.5
- Recurring mortgage trail
- $40,000 × 1.5–2.5
- Indicative value
- $590,000–$770,000
The same $180,000 of total recurring revenue valued at a single blended 3.0× comes out at $540,000 — below even the bottom of the split calculation. Identifying each revenue stream separately is not a technicality.
Price is not the same as value
Two offers on the same book can carry the same multiple and be worth substantially different amounts to you, because the multiple says nothing about when you get paid or what has to happen first.
Offer A
4.0× paid in full at settlement.
Offer B
4.4× with a third held back for two years, adjusted for any clients who leave.
Offer B is 10 per cent higher on paper. Whether it is better depends on how confident you are about retention after you have gone, what the adjustment mechanism actually says, and whether the deferred amount is secured.
The terms worth reading closely are the payment at settlement, the deferred consideration and how it is secured, any retention or earn-out adjustment, what you are required to do during the transition, and any restraint of trade. How to sell a financial adviser client book in New Zealand covers where each of these gets settled in the process.
You do not have to sell all of it
Partial sales are common, and they are frequently a better answer than a full exit. Advisers sell one revenue stream and keep the others, sell a region, sell the clients they no longer have capacity to service properly, or sell most of the book and keep the twenty relationships they actually enjoy.
The clients you keep stay yours. A partial sale can release capital or reduce workload without ending your advice career, and for advisers in their late fifties it is often the option that was not obvious until someone pointed it out.
Getting a number for your own book
An indicative range is useful for orientation. It is not an appraisal, because it knows nothing about your clients.
An appraisal is worth having well before you intend to do anything. If it tells you the book is worth more than you thought, that changes your planning. If it tells you the number is below what you need, you have time to do something about it — and the things that move it mostly take a year or two to show up in the evidence.
Frequently asked questions
How is a financial adviser client book valued in New Zealand?
Almost always as a multiple of recurring annual revenue, with the multiple set by the type of revenue and then adjusted for the characteristics of the client base — retention, demographics, concentration, data quality, adviser dependence and how easily the relationships transfer.
What multiple will I get for my book?
Nobody can tell you that from the revenue figure alone. The indicative ranges on this page are a starting point; where a particular book sits within its range, or outside it, depends on the underlying clients and on the structure of the transaction.
Does the size of the book change the multiple?
It can. Larger books may attract a different set of buyers from smaller ones, and very small books can be limited by the cost of doing a transaction at all. Size affects who is interested more than it sets the multiple directly.
Is my client book worth more than my advice business?
They are different things. A client book sale is the client relationships and the recurring revenue attached to them. A business sale can also include staff, systems, brand, premises, contracts and future new-business capability, and is usually valued differently. It is worth being clear which one you are contemplating.
Can I find out what my book is worth without putting it on the market?
Yes. An appraisal is confidential, commits you to nothing and does not market your business. Most advisers who ask us are not ready to sell, and several are years away.
Is there a fee for an appraisal?
No. There is no brokerage, listing or success fee charged to the seller. You may still incur your own legal, accounting or other professional costs if you go on to complete a transaction.
Indicative information only. The ranges on this page reflect our view of the New Zealand market at the date shown and are general information, not financial, legal, accounting or tax advice, and not a valuation of any particular book.
