CountPlus company directors say they are “pleased” with the purchase of licensee Count Financial and it’s 359-strong network of advisers from CBA for $2.5 million, and will encourage owners to endorse the acquisition at an extraordinary general meeting in early August.
As it stands, the move would see CountPlus become the 11th largest licensee owner in the country between ANZ (385) and Centrepoint Alliance (346). Count Financial currently has $8.1 billion of client funds under administrations spread across 160 firms.
The purchase was announced in an ASX note this morning, with the converged accounting and advice group taking 85 per cent of the licensee and the residual 15 per cent owned by a trust representing 19 affiliated Count firms.
The two entities have a shared history; Countplus was founded in 2007 by Barry Lambert, who also started Count Financial before selling it to CBA for $373 million in 2011. Mr Lambert stepped down as chairman on the ASX listed CountPlus in April, 2017.
The Commonwealth Bank has confirmed its intention to divest its 35.85 per cent stake in the CountPlus, and will provide $200 million to cover remediation of past misconduct as part of the deal.
In a CEO letter, CountPlus’s Matthew Rowe indicated the acquisition was an opportunistic play on the market’s current distaste for institutionally-owned advice as much as a vote of confidence in the converged accounting and advice model.
“At a time when alternate financial service business models are at a crossroads – leading some to exit from financial advice – CountPlus has a clear vision for its successful path forward and so today is investing deeper in the converged accounting-led financial advice segment,” Rowe stated.
He indicated CountPlus was strategically leveraging market antipathy towards bank-owned advice, noting that “institutions fear a deepening of the trust deficit that exists with their customers”. CountPlus’s board includes former Financial Planning Australia CEO Mark Rantall and former Financial Standards and Ethics Authority director Michael O’Neill.
The “chequered dynamics” of the broader industry, he said, play to the “well-defined strengths” of the CountPlus network, whose firms operate on a non-vertically integrated, fee-for-service model contrary to the banks.
The contrasting Countplus model will mean Count Financial advisers may need to change their business operations, which Rowe acknowledged by saying one of their next steps was to “assist Count Financial member firms transition to the ‘new world’ of financial advice”.
Tasks such as pulling grandfathered commissions out of the books and adhering to new community standards were already on the cards for Count Financial advisers in the wake of the Hayne royal commission. The purchase by CountPlus, however, will mean they also must restructure remuneration models from funds-under-management to fee-for-service to bring them in line with industry trends towards greater transparency.
The takeover could have further implications for the way Count Financial firms operate if CountPlus take the opportunity to extend its ‘owner, driver, partner’ model to its licensed entities. As per Professional Planner’s discussion with Rowe last month, CountPlus takes a roughly 40 per cent stake in amenable advice businesses and involves itself in the “commercial drivers of the business”. This means providing access to capital, succession channels and what Rowe calls a “layer of expertise”.
The ‘owner, driver, partner model’ has been successful, with Rowe revealing the average profit margin of CountPlus’s 19 affiliated firms improved from 12 per cent to 20 per cent since February, 2017.
Only a portion of the 359 advisers are in play for the ownership model, however, as CountPlus only take stakes in firms with at least four principals. 15 of the firms that fit the mandate are already in the Count Plus network.
Rowe believes that existing connection or “shared history” is one of the things that makes CountPlus a “natural home” for Count Financial advisers. “The Count Financial network already fits our ‘family photograph’,” he said.