With a pipeline of potential advisers and M&A opportunities, Centrepoint Alliance aims to drive size of the licensee to further consolidate its position as largest non-institutional licensee.
Posting its full-year financial results to the ASX on Wednesday morning, the firm posted a $6.3 million net profit after tax, slightly down from $6.5 million in FY22.
Centrepoint reported $19.7 million of authorised representative (AR) fee revenue, and $242.9 million of advice fee revenue, for total revenue from contracts with customers of $271 million.
The group paid $238.4 million of advice fee revenue to advisers and generated “gross profit” (or revenue before employee-related expenses, finance costs and tax) of $34.8 million.
Centrepoint has 511 advisers under the licensee while offering services to another 797 self-licenced advisers for a total of 1308 total adviser relationships.
According to data in Centrepoint’s investor presentation, sourced from Wealth Data, it is the third-largest licensee, behind Insignia and AMP.
This network accounted for $64 billion in funds under advice (FUA), with an average of $50 million in FUA per adviser, and 154,000 clients in the network.
The organisation will continue to seek growth through M&A activity, including potential licensee groups, and has received an indicative approval from NAB for a debt facility of $10 million to fund acquisitions.
Additionally, it claimed to have 271 ARs and 93 self-licensed firms in the pipeline to potentially join the network.
However, Centrepoint CEO John Shuttleworth makes it clear that adviser pipeline and the M&A opportunities are separate initiatives.
“The sales pipeline that we have is largely around individual authorised reps and practices that we recruit,” Shuttleworth tells Professional Planner.
“We track everything in Salesforce, there are different stages, but they are largely conversations taking place with authorised reps that would be with other licensees. The M&A side is separate to that.”
Centrepoint acquired Clearview’s advice business in 2021 and the M&A opportunities the company has identified will be along similar cultural lines.
“When we did the acquisition of the Clearview advice business and we brought Clearview and Matrix advisers across, that was a terrific acquisition because the businesses were culturally aligned,” Shuttleworth says.
“When you look at the licence fees that Clearview were charging and the fees we charge, Clearview’s was slightly higher than Matrix but we harmonsied them into one core model.”
Shuttleworth adds the value in getting the right cultural fit is avoiding adviser attrition.
“[You have to be] careful you don’t end up with a lot of adviser attrition because you’ve recruited advisers where you’re changing fee structures or culturally they’re not aligned, because it can erode a lot of value,” Shuttleworth says.
Amid debate of what is the preferable licensee fee model, Centrepoint has eschewed taking equity stakes in advice firms or introducing variable fee structures, instead retaining a fixed-fee model.
“The rationale for our flat-fee structure is that it’s really one of equity,” Shuttleworth says.
“You get different philosophical views on this, but our view is if you’re a successful practice and you’re generating over $1 million in revenue, why should you be paying more for services than the smaller practices, because you’re consuming the same services?”
Shuttleworth says there has an equitable model where all participating are getting the same level of services.
“Others will argue that if it’s a smaller practice and they can’t afford the flat fee then the revenue split can help them,” Shuttleworth says. “There’s ongoing debates about this, but it’s where we’ve landed.”
Centrepoint touted its ‘lending as a service’ business, which would allow advisers to build a lending business by operating as an authorised representative on its credit licence. It stated 30 firms are participating, with another 27 in the pipeline.
