Lessons from the grave: How institutional ownership spelled the end for Genesys

Banking analysts value financial institutions by valuing their component businesses. The problem is that some of those businesses are fundamentally different to the institution’s core business, yet analysts apply a similar approach across all those businesses. It is this lack of understanding of what drives dealer groups that led to the downfall of Genesys.

More recently, institutions have been writing big cheques to get advisory practices to join their aligned licensees. These hefty payments, which are often described by institutions as “transition payments”, are known to have hit seven figures – although the cost of switching dealers is arguably marginal. On top of all this, institutions have been busy buying stakes in underlying adviser firms as a recruitment and retention exercise.

The premise for this irrational, impulsive spending is the same. Institutions believe that the advisers joining their licensee will replicate the production of other established practices in the dealer group. However, it rarely works that way. Genesys Wealth Advisers taught AMP this painful lesson.

Download the full cover story, “Lessons from the Grave – the rise and ultimate demise of a financial planning icon”, as a PDF.