WT Financial Group, owner of licensee group Wealth Today, is confident risk advice will continue to play an important role in the industry after it acquired Synchron Tuesday to create the largest non-institutionally-owned financial adviser network in Australia.
In an announcement to the ASX, WTL said the purchase will cost $7.96 million including approximately $3 million in liabilities from Synchron.
WTL managing director Keith Cullen tells Professional Planner he is willing to back risk advice as a continuing profitable model, despite potential regulatory challenges stemming from the upcoming the Life Insurance Framework review (part of the Quality of Advice Review) and the removal of Chapter 7 from the Corporations Act.
“People managing their risk appropriately is a critical part of anyone’s financial plan – some would argue it’s the most critical aspect. We see continued growth in that market and people need professional advice around it because otherwise they’re left at the behest of buying online or from telemarketers.”
In terms of the remuneration structure in the industry, Cullen believes commissions are a “perfectly legitimate way for advisers to be rewarded”.
“I might be considered a pariah in the industry for feeling that way, but I’ve got no problem with it.”
Money in hand
With transaction and integration costs estimated to be $1 million to $2 million, the expected value of the completed acquisition could be up to $13 million.
There will be an initial payment of $3.47 million comprised of roughly $2.5 million in cash and $1 million in shares, along with a deferred settlement component which is dependent on the value of the business.
“Regardless of anything, we need to give them another $1 million in cash in 12 months,” Cullen says. “But also at that 12-month mark we will have a look at what the retentions look like in terms of revenue and adviser numbers.”
“Assuming all the benchmarks are met – and we have no reason to believe they won’t be – then we owe them another $2.5 million.”
Whammo
The WTL adviser network will have over 600 advisers and increase funds under advice to $16 billion. This includes the roughly 150 advisers it added as part of the acquisition of Sentry Group last year.
Compliance committees, risk management frameworks, adviser education and training, consumer market tools, approved product lists and professional indemnity insurance will be shared across the businesses.
Synchron founders Don Trapnell and John Prossor will continue working in the business with Trapnell assuming the role of chair of WTL’s Synchron subsidiary which retains its existing brand. Cullen says this follows the same decision made for Sentry Group.
Sentry Advice, Sentry Financial Services and Wealthsure have all been combined into the Sentry Group licensee.
“The businesses keep their brands but the activity underneath can be leveraged across and bring the value to all the advisers. Advisers and people in the businesses have their emotional capital invested. Wealth Today, Sentry and Synchron are all great brands so there’s no reason to change those.”
One of the major benefits of taking control of Synchron’s operations is giving all advisers access to the NextGen adviser program.
“[Trapnell and Prossor] have done a sensational job with that,” Cullen says. “A decade ago their average adviser age was pushing 60 so they actively went out and had their state managers recruit advisers under 40. Whammo, 10 years later the average adviser age has dropped from 67 to 47 which is fantastic.”
