Despite reporting an indicative 57 per cent annual increase in revenue, WT Financial Group will maintain its focus on driving further growth with the practices in its network rather than “chasing” more advisers.
On Tuesday morning it reported a 57 per cent increase in revenue from $103.63 million in FY22 to $162.49 million, along with a 130 per cent boost in net profit after tax from $1.87 million to $4.31 million. The company expects its audited financial results to be due mid-September.
Group founder and managing director Keith Cullen tells Professional Planner the acquisitions WT Financial Group has made have been a key component to revenue growth, but more importantly it was the ability to rationalise the network and back-office operations that drove profit growth.
“We’ve brought together three disparate groups of advisers,” Cullen says, referring to Wealth Today, Sentry and Synchron.
“We’re keeping the culture within those groups and the names because there’s so much legacy value in those cohorts of advisers. But in terms of the service proposition to them we’ve really standardised everything on the back end, so we have our personnel working across of all three of the cohorts.”
Cullen says no changes are expected to the company’s cost base, with the focus instead being on continuing to grow top-line revenue, which won’t prioritise “chasing new advisers”.
“As much as the door is open and we’re welcoming them, it’s more about working with the practices that are in the group to make their businesses more profitable,” Cullen says.
“With the vast majority of our practices we participate in revenue upside with them, so their profitability and our profitability are completely aligned.”
However, the group currently has approximately a quarter of its 400-plus adviser network on fixed-fee arrangements put in place before WT Financial Group acquired the licensees.
While Cullen doesn’t have an issue with the dollar figure currently generated by the fixed fees, he still believes the model isn’t logical.
“If I was a practice, I wouldn’t want that either – I want my licensee and myself to be on the same page in terms of what’s important and that’s the financial health of the individual practices,” Cullen says.
“To me, that’s the transformation that needs to happen. I don’t know how people that have gone down that fixed fee path back away from it.”
Cullen elaborated on the issue of fixed fees for licensees at the Professional Planner Licensee Summit in June, explaining it doesn’t compensate licensees adequately for risk.
“I’m not disappointed with the level of fees they’re paying us,” Cullen says, adding the mechanism for getting to that level needs to be aligned.
“We’re happy with where they are now, I’m not saying they’re short paying us, but I want to get on the same page with them, but it’s beholden on us to demonstrate to them the value out of that.”
Sunshine on a rainy day
While profitability for licensees has been a concern shared around the industry, Cullen says there’s still “room to move” amid the evolution towards professionalism.
“A lot of money has been taken out of the space due to the original conflicted remuneration reforms and the reduction in risk commissions,” Cullen says.
“It’s the same as griping about regulatory changes, the business model has changed. People need to stop living in the past and really focus on where the opportunities are in the future and that is to get aligned with your practices to really help them grow.”
Cullen says he doesn’t agree with the negativity in the industry given the advice supply/demand imbalance is stacked in favour of the profession.
“Everywhere I go people are still talking doom and gloom, it’s really frustrating to me,” Cullen says.
“We can gripe about the regulatory and legislative environment, but it is what it is, and the government is motivated to fix it. Even if they don’t make any changes, everyone can service their customers well [and] run good practices. It’s doable. It’s not like we’ve been ground to a halt.”
Cullen is optimistic about the Quality of Advice Review reforms and the benefits of a reset to the regulatory landscape in favour of advisers.
“I get a bit a bit upset with all the criticisms of this minister,” Cullen says.
“He’s been in the job 10 minutes in comparison to [how long] the previous government had control of the space for. He’s got a complex, hard-wired legislative regime he’s trying to deal with. It’s a complex problem he has to solve.”
Frequently dealing with Treasury, Cullen described their level of engagement as “absolutely fantastic”.
“They’re really getting it – more so that I’ve ever seen before,” Cullen says.
“[For example], gaining an understanding of what the legislation means at an operative level – not just from an ASIC, enforcement or compliance perspective, but from an ‘in-the-room-with-the-client’ [perspective].”
Getting in sync
The group acquired Synchron last year and Cullen views the acquisition as a regrouping of front-line specialist risk advice.
“We want to see more advisers back into the personal risk space. The exodus of that space is not good from a societal perspective, [for] clients or our professional,” Cullen says.
“That’s a big push for us in the next 12 to 18 months. If you’re a wealth specialist and you don’t want to do it, you need to work with us to pair you up with a risk specialist. That’s a win/win for both of you. If you’ve given up on risk, you need to get re-engaged with it because it’s not a good outcome for the profession or your clients.”
Risk advisers departed the industry over the last four years due to the reduction of commissions and an inflexible education regime that took no account of risk advice as a specialisation.
“Unfortunately, a lot of the older risk advisers, a lot of the intellectual property in the game walked out the door because of FASEA and that’s really disappointing,” Cullen says, referring to the authority that oversaw the education standard.
According to data from Adviser Ratings, there are 150 “pure risk” advisers along with another 3400 advisers that write risk.
“There’s a lot of intellectual property that sits in [Synchron] and if advisers are looking to join a group, if they’re a risk specialist, then there’s no better home to be in,” Cullen says.
“If they’re a wealth specialist that doesn’t to do risk there’s no better home to be either because you’re going to fine someone within your own cohort that you can joint venture the risk component with.”
