Centrepoint Alliance says it will continue to accelerate growth through further acquisitions, with a focus on expanding salaried advice business, one of its key pillars of the business strategy.
The firm’s chief executive John Shuttleworth tells Professional Planner the reason why owning a salaried advice business generates interest is in its highly attractive revenue contribution.
By the end of 2023 Centrepoint acquired Brisbane-based Financial Advice Matters with 19 salaried advisers, which services approximately 2100 client households and generated $6.1 million in FY23.
Following the FAM acquisition, Centrepoint has been approached by businesses which plan to sell their books and exit within three to five years, but the potential business needs to fit in terms of its size.
“What I would say it is not just a one size fits all model, but there is a quite diversified set of opportunities that we can look at,” Shuttleworth says.
“I think there is a sweet spot of firms in the range of five to 10 advisers.
“If there are smaller firms we would be considering them largely on the case-by-case basis. If the firm is too small, we would have to do a lot of acquisitions to make the economics work.”
Shuttleworth previously told Professional Planner the firm preferred a fixed-fee licensee model, rather than variable fees based on revenue or taking equity stakes.
At the time of publishing its annual results in August, Centrepoint had a network of 1374 advisers, which included 549 advisers licensed under its three main AFSLs and 825 advisers to whom Centrepoint offered its self-licensed solutions.
Shuttleworth says Centrepoint is also open to “a broad range of businesses” and is actively looking to invest in expansion, including through tuck-in acquisitions. In the case of FAM, it also happened to be a firm they were familiar with, as well as possessing the corporatised, salaried adviser model it covets.
“The FAM business that we acquired had been under our licence since 2015, so we were responsible for the risk and compliance management and oversight that business, so we knew them very well,” Shuttleworth says.
“When it came around that CEO and the shareholders wanted to divest it, it was an easier decision for us because we knew that was a quality business and therefore could do an acquisition.”
Rise of mid-tiers
Research sourced from Wealth Data showed Centrepoint was the third largest licensee owner behind Entireti (including the AMP licensees it acquired) with 1183 advisers and Count with 672.
Since the exit of institutional players in the aftermath of the Hayne royal commission, the financial advice market has seen growth of mid-tier advice firms who have now come to dominate the list of the top ten biggest players.
As a result, the market has seen heightened merger and acquisition activity, which is often quite disruptive to businesses and leads to higher adviser movement, with more planners considering a switch.
“Whenever you do a transaction, what happens is the first thing is recruitment stops or at least slows down to a near stop,” Shuttleworth says.
The rationale is that when two businesses are put together, the stakeholders in each business will take a “wait and see” approach to whether they want to part of the new, combined firm.
“You tend to find that the recruitment stops, and the attrition continues,” Shuttleworth says, adding annual industry attrition normally runs around 7 per cent.
He adds that out of the top ten licensee owners only three – Centrepoint, Sequoia and Lifespan – have recorded growth in adviser numbers.
“Like I said there is 6 to 7 per cent of advisers switching firms, and you have got a contestable market of about 1000 advisers in a normal year, and as a state of history shows where there has been a lot of merger activity, the switching accelerates,” Shuttleworth says.
“If you look at all those large firms that have done the transactions there is like 1800 advisers in the market that are impacted by those transactions.”
For Centrepoint, the focus is now about how to attract those advisers who “are perhaps looking for an alternative to where they are”.
“When [advisers] decide to move they go two places: they join the licence or they become self-licensed,” Shuttleworth says.
“Because we are uniquely positioned where we have both – a highly developed licensee service and a highly-developed self-licensed business – we should be able to pick a fair share of that contestable market.”
In its full-year FY24 results posted in August, Centrepoint saw a $1.5 million increase in its net profit after tax to $7.8 million. At the same time, net revenue grew 11 per cent to $36.1 million helped by the uplift from the FAM acquisition.
