While the influx of foreign capital into the wealth management sector has changed the game for a lot of local groups,\u00a0this could create a challenge for small, independent firms down the line.<\/b>\u00a0<\/p>\n
Speaking at the FSC\u2019s Shaping Advice Summit in Sydney, AZ NGA group chief executive Paul Barrett suggested that small advice businesses are likely to\u00a0miss out on\u00a0foreign capital opportunities.\u00a0<\/p>\n
\u201cThey\u2019re not interested in small; they\u2019re interested in scale,\u201d Barrett said on a panel.\u00a0<\/p>\n
\u201cThese investors are not interested in buying small businesses. Okay,\u00a0they\u2019re\u00a0just\u00a0not.\u00a0There\u2019s\u00a0a\u00a0handful of smaller private\u00a0equity firms trying\u00a0to do roll-ups that are going and buying individual financial planning firms.\u00a0It\u2019s\u00a0a hard thing\u00a0to do, and\u00a0it\u2019s\u00a0a long, long road. So,\u00a0that\u2019s\u00a0a challenging thing to do. What they really want is to come in and get their hands on something large with scale.\u201d\u00a0<\/p>\n
Also appearing on the panel,\u00a0Matt Fogarty, executive general manager of advice partnerships at infocus, said the restructuring of the advice sector in recent years has only made the industry more attractive, but this\u00a0hasn\u2019t\u00a0made small businesses any more attractive to the big capital firms.\u00a0<\/p>\n
\u201cThey can see the consolidation theme happening, they know that the margins are going to be attractive.\u00a0We\u2019re\u00a0in a structural growth phase.\u00a0We\u2019ve\u00a0moved\u00a0largely through\u00a0the regulatory uplift that\u00a0we\u2019ve\u00a0all gone through.\u00a0<\/p>\n
\u201cIt\u2019s\u00a0reasonably\u00a0stable, and so that structural growth of\u00a0supply and demand, the way it is\u00a0at\u00a0the moment, is not going to rectify itself quickly.\u00a0The\u00a0bottom\u00a0line\u00a0of it all is, what I think\u00a0they\u2019re\u00a0really after, is\u00a0to capture scale to grow client.\u201d\u00a0<\/p>\n
With this in mind, his\u00a0advice to small businesses is to \u201cjoin an advice platform\u201d.\u00a0While smaller firms \u2013 which\u00a0make\u00a0up\u00a0a\u00a0large portion\u00a0of the current\u00a0ecosystem \u2013\u00a0may be able to survive and even prosper now, Barrett believes that this could change in just a few short years.\u00a0<\/p>\n
\u201cFast forward two or three years, it\u2019s going to be very, very difficult for a generalist financial planning practice in the suburbs to compete with what the advice platform is going to offer because they\u2019re going to do deals on price, they\u2019re going to have better tech, they\u2019re going to have better client experience, client engagement, better brand.\u00a0\u00a0<\/p>\n
\u201cThis is a point in time right now. The industry is going to look so different in five years. In 10 years,\u00a0it\u2019s\u00a0going to be crazy different.\u201d\u00a0<\/p>\n
While there are several contributing factors to the heightened capital interest, Barrett said investors are also seeing an opportunity to take a stake in a sector that is still in the\u00a0early stages\u00a0of its growth period.\u00a0<\/p>\n
\u201cThe thesis that most private equity bring to the table is, \u2018We want to get closer to the client\u2019.\u00a0Now, in the UK and US, this aggregation advice platform evolution is a thing. There are some incredibly impressive organisations in those\u00a0markets\u00a0and the valuations in those markets are going one way,\u201d he said.\u00a0<\/p>\n
\u201cNow that capital is coming here,\u00a0there\u2019s\u00a0also this opportunity for investors to come to this market at its infancy in the evolution of\u00a0advice\u00a0platforms and buy low and sell high,\u00a0so\u00a0it\u2019s\u00a0not\u00a0just demand supply.\u00a0There\u2019s\u00a0a bunch of factors.\u201d\u00a0<\/p>\n
As for those who do manage to secure capital backing, CoreData founder and principal Andrew Inwood said the process of forming such a partnership, as well as\u00a0maintaining\u00a0it, presents its own issues.\u00a0<\/p>\n
\u201cThe challenge is that\u00a0there\u2019s\u00a0a lot of capital, but\u00a0it\u2019s\u00a0extremely tricky to manage, and\u00a0it\u2019s\u00a0hard to get. And once they once\u00a0you\u2019ve\u00a0got it, they demand a lot of attention.\u201d\u00a0<\/p>\n
Barrett added:\u00a0\u201cIt\u2019s\u00a0not easy to get. Once you get it, the demands and expectations that are placed upon you, they\u2019re not the same as the demands and expectations that you have placed upon you when you\u2019re in that banking environment, or in the self-owned business or the licensee, it\u2019s quite different.\u201d\u00a0<\/p>\n
AZ NGA\u00a0is a professional services advisory group\u00a0that provides strategic investments into Australian financial services businesses, as well as\u00a0providing support through operational\u00a0services. The group itself also receives capital backing from\u00a0US investment firm\u00a0Oaktree Capital Management and Milan-listed asset manager Azimut.\u00a0<\/p>\n
Despite the added pressure,\u00a0Barrett said the growing interest of\u00a0foreign capital investors in the sector has been critical in bringing advice into a new phase.\u00a0<\/p>\n
\u201cNet\u00a0net, though,\u00a0that\u2019s\u00a0a very positive\u00a0thing because\u00a0we\u2019re\u00a0turning what was,\u00a0once upon a time,\u00a0a family cottage industry, a distribution business, into a fair\u00a0dinkum\u00a0powerhouse. And advice platforms are\u00a0emerging\u00a0and standing in the craters that were left behind by the banks\u2019\u00a0exit from the sector, and\u00a0they\u2019re\u00a0only just warming up.\u00a0<\/p>\n
\u201cFast\u00a0forward\u00a0a decade from now, and these advice platforms are going to be multi-billion-dollar enterprises.\u00a0They\u2019re\u00a0going to hire\u00a0thousands of people, and you want to think about what private equity sees in that.\u00a0\u00a0<\/p>\n
\u201c[AZ\u00a0NGA is]\u00a0probably the\u00a0largest aggregator of financial planning firms in Australia.\u00a0We\u2019ve\u00a0got\u00a0three\u00a0per cent\u00a0market share, right? There\u2019s huge upside for private equity, and\u00a0that\u2019s\u00a0just the basics.\u201d\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"While the influx of foreign capital into the wealth management sector has changed the game for a lot…\n","protected":false},"author":3,"featured_media":977537,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[15],"tags":[284660,392347,64,392348,86628,255,3743,67,132,68],"class_list":["post-977536","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-afsl","tag-az-nga","tag-business","tag-coredata","tag-infocus","tag-personal-finance","tag-private-equity","tag-united-states","tag-unitedstates","tag-us"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/117030841684933111","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/977536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=977536"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/977536\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/977537"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=977536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=977536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=977536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}