Linchpin Capital, comprising a financial planning dealer group, multi-sector institutional investment management firm and research house, is embarking on an ambitious growth plan, according to executive director Paul Nielsen.
The firm’s financial services division, The Financial Link Group (TFLG), currently owns Australian Financial Services licensees Beacon Group and Risk and Investment Advisors Australia (RIAA), which it officially acquires next month. Beacon’s managing director is Peter Daly, former CEO of Australian Financial Services Group, which entered administration in May 2013.
Beacon employs around 150 advisers, with the RIAA acquisition boosting the dealer group’s planner numbers to more than 200. Neilsen says organic growth is its favoured approach, with “no set objective of making x number of acquisitions…though we hope that some people will approach us, and we may very well find opportunities along the way in that regard.”
An IPO ahead?
Listing Linchpin Capital on the Australian Stock Exchange is the ultimate goal of Neilsen and his fellow directors. “We want to be in a position where we will list on the ASX in some two-and-a-half to three-and-a-half years’ time and to be a little bit larger than we are now. That’s a very exciting proposition for the planners that join us,” Neilsen says.
If successful, The Link Financial Group will become one of a small number of Australian financial planning dealer groups listed on the ASX, including IOOF, Centrepoint Alliance and Spring Financial.
Non-institutional growth
“FoFA has certainly made smaller practices a lot more profit-constrained, so it’s resulting in many smaller groups having to consider merging or being acquired by other groups,” Neilsen says
Instead of merely focusing on adding adviser volume, he says, “Where a person‘s standing enhances our own public standing within the marketplace, that’s far more interesting to us rather than numbers. Quality first and foremost is really the focal point.”
Neilsen notes the importance of maintaining compliance standards among both individual financial advisers and practices that join Link Financial Group.
“You go through your due diligence. But there has to be first and foremost a strong meeting of culture, of how you conduct your business. That is then reflected in the number of complaints, in their breaches and in the level of [Professional Indemnity] insurance they pay.
“It’s a process of [having] to vet the planner before they join the group. And if you find things, then it’s a case [of determining] ‘Can they be explained away?’ but you certainly would notify ASIC about any things that you do uncover…so that you’re able to have advisers who join you with a clean template, so to speak,” Neilsen says.
Growth through succession
He believes the demographics of the practice principals within the group, which are predominantly aged in their 50s, will naturally influence growth of individual practices. “So they’re not only looking at what has occurred from FoFA, but also the transition [of their own businesses], so they will reach out [to other planners] and we’re quite happy to have those discussions.”
Around half of the group’s financial planners are focused on risk advice, though Neilsen says more will broaden their skillset into holistic financial planning.
“Some advisers are exceptional risk writers, and are happy to be risk writers. There are some who want to expand the scope of risk writing into financial planning, or into estate planning, because they are skills in their own right.
“We’re very proactive in providing internal training in order to create an environment where a financial planner is able to increase the scope of their business,” Neilsen says.
The dealer group also encourages its planners to service clients’ property finance needs, through referrals to in-house mortgage brokers or dual-qualified advisers. Neilsen says this helps the group compete more effectively with the bank-owned advice channels, who have access to large mortgage business resources.
“In order to be able to tackle that competitive pressure from banks…if you’re able to upgrade the skills of the adviser, you diversify their income and you increase the overall valuation of their businesses,” he says.
