No single model wins: advice ownership set to stay diverse

The ownership and structure of financial advice businesses will continue to be diverse and varied, with no single structure likely to dominate over the coming years, an industry summit has heard.

Morrows managing director Laurel Moulynox said she is a strong believer in the employee-owned model, while both the managing director and head of Merchant Australia Jamie Melville and AZ NGA chief operating officer Nathan Jacobsen believe there is as much fragmentation taking place right now as there is consolidation.

Moulynox said Morrows went from four partners to three when one, who owned 40 per cent of the business, suddenly passed away. It was time to bring new faces.

“We also wanted to bring new partners into the business because a lot of the staff had been with us a very long time. One of them had been there 25 years as an employee,” Moulynox said, during a panel session at the Netwealth Accelerate Summit in Melbourne on 17 September.

She said the partners were determined to remain employee-owned and the business then embarked on a journey to get there. The path wasn’t easy, and while they knew they had the right people already in the business they needed to figure out how to structure it the best way. With external help they sold off some underperforming parts of the business.

“We were a multidiscipline business that did pretty much everything,” Moulynox said.

Morrows had a large accounting practice, an audit practice, a lending practice, a legal business, a private wealth business which Moulynox said was restructured to the “right size”.

This approach addressed the opportunity for those employees who had been with the business for a long time. And for Moulynox, this is the winning model of ownership for the next five years. Since the restructure seven employees have become partners in the business, bringing the total count to 10.

“To see those seven people come into our business over the last three years as equity holders, go from really good leaders within the business to now equity holders, they have just blossomed, and the business is better because of it,” Moulynox said.

“For our path, we want to keep going… The next row of talent that might be in their late 20s, early 30s, we’ve got people that are saying: ‘Well, when’s it my turn?’ So, for us, that’s absolutely what our pathway and our future looks like.”

Jacobsen said all business models will still be here in 10 years’ time.

“But the role that we want to play is we want to put advice at the top of that value chain. We want to use our size and our bench strength and our capital to put advisers and their businesses calling the shots in the industry. That’s what we’re passionate about, and that’s the role we’re going to play.”

He shared a consolidation story that 18 months ago he would not have thought possible.

“The interesting dynamic is happening in our business because we’ve actually told, or asked, 35 firms that consolidated into five super firms, and they’ve all agreed,” he said.

This restructuring will lead to the departure of a number of firms’ founders, which Jacobsen says won’t be a problem, as there is “this sea of talent that is just emerging across 1000 people around the country, who are probably a little bit trapped by the founders – not in a bad way, but just they didn’t see the pathway for themselves”.

“Now they’re seeing all these pathways. We’ve got all these young people stepping up into bigger roles, and it’s really exciting to watch that,” Jacobsen said.

Melville said he disagrees with the often-heard view that there’s going to be consolidation across advice practices, or that there will eventually be no small players left.

“I think there’s as much fragmentation as there is consolidation,” he said.

“Earlier this year, you saw a group lift out of Morgan Stanley, [to form] Granite Bay. Macquarie just lost their biggest team up in Queensland. While there will be consolidation, you can’t ignore the human capital piece.”

He said he is excited about the younger generation coming into the industry in their late 20s or early 30s.

“And the younger people have got hopes and dreams,” he said. “They want to have a crack.”