There’s more capital trying to buy advice businesses in Australia than ever before, according to people working on these deals.
In addition to investment firms which have already stumped up capital – such as Sydney-based Quadrant Private Equity, ASX-listed Sequoia Financial Group, US-based KKR, Italian wealth business, Azimut Group and US-based Focus Financial Partners – new investors are looking to allocate capital to the local wealth market, deal makers are suggesting.
Private market capital with varying investment time horizons – including venture capital funds, private equity funds and family office capital, as well as traditional asset managers seeking more reliable private market returns – are looking to acquire advice businesses.
At a time when banks are cutting loose thousands of authorised representatives from their aligned dealer groups and salaried networks, private capital is stepping in to buy up practices via aggregator models and other “cluster” style groups that are emerging which take ownership stakes in self-licensed practices and practices falling out of aligned dealer groups.
West Australian-based Broadleaf Financial Group has started its acquisition journey after raising $3 million in its first capital raising round from private investors, its founder Richard Hernan told Professional Planner recently.
Family offices are seeking to deploy capital in the highly-fragmented advice market via licensees along the lines of the Hong Kong family office-backed Oreana Financial Services, which was previously National Australia Bank’s private wealth business and which has picked up several former Godfrey Pembroke practices.
“There has been a reassessment of risk by investors deploying capital into advice,” Stephen Prendeville, Forte Asset Solutions managing director, says.
“It’s been an industry under siege for a long time, but now we have a lot of known regulation coming in, with buyers seeing opportunity for technology to come into play,” Prendeville adds.
There has never been a more compelling proposition for investors to be looking at deploying capital into wealth and advice, Prendeville reckons, as do other people close to these deals who spoke with Professional Planner but asked not to be quoted directly.
“You’ve got legislated growth with the continuing superannuation guarantee, higher barriers to entry with the new education standards, Australian demographics ensuring baby boomers are retiring each week and large transfers of intergenerational wealth,” Prendeville outlines, noting investors of all stripes are beginning to focus on the advice segment.
Existing private equity-backed advice groups including Fitzpatricks Private Wealth, Findex, Interprac, Madison Financial Group, to name a few, have continued to look to the future while the bank-owned aligned advice businesses have been thrown into turmoil.
Prendeville and others expect more capital from private investors through venture capital, private equity and family offices to find its way into the local advice industry seeking reliable ongoing returns given the likely increasing demand for advice and the expected under supply of quality advisers.