The race for financial advice scale becomes increasingly crowded
ANALYSIS
There is a good reason why the announcement that Paul Barrett’s AZ NGA had joined with Invest Blue had co-invested in paraplanning business, Virtual Business Partners – it brought together one of AMP Limited’s largest entities with one of the financial planning sector’s most active investors.
Coming little more than a week after the board of Centrepoint Alliance rejected the unsolicited takeover bid by Diverger, it has prompted speculation of what might happen if InvestBlue and AZ NGA were to deepen their relationship beyond the equity they now hold in VBP.
The bottom line is that while the merger of Diverger and Centrepoint would have given rise to Australia’s third largest financial planning group, the combination of InvestBlue and AZ NGA would deliver an even larger presence.
The bottom line right now is that AZ NGA is an investor in financial planning businesses, not a licensee and that, for now at least, InvestBlue operates as an authorised representative of AMP Financial Planning.
However, it is worth also remembering the financial advice strategy being rolled out by AMP Limited, not least the restructuring of its equity holdings in advice businesses and the launch of its professional services model entailing a “user pays”.
This then needs to be seen against the background of AMP also increasingly gearing its platform offering towards attracting independent financial advisers (IFAs).
AMP has told investors that it is pursuing ongoing implementation of a contemporary service model and a new fee model for advice practice to support the objective of a long-term sustainable advice model.
Also worth remembering is that AMP has said its longer-term ambition is achieving break-even in its advice by the 2024 financial year “through further rightsizing of support activities and cost reductions from automation”.
Given this position on the part of AMP, Invest Blue’s investment in VBP reflects the need to source back-office support outside of AMP.
The official statement accompanying the announcement of the joint investment in VBP noted that it “reinforces Invest Blue’s strategy to acquire capability and empower people on its mission to become Australia’s largest integrated financial advice brand”
And, as Invest Blue chief executive, David Stephen stated in the announcement, “we’re also keen to attract and acquire other like-minded advice businesses”.
The bottom line is that the race for scale in financial planning is becoming increasingly crowded with Centrepoint, Diverger, Count Financial, Invest Blue and a range of others competing for a decreasing number of financial advisers.
Great Analysis. It’s hard for me to understand how licensees (especially the ASX ones) expect to grow revenue/profit they way they are forecasting. Their revenue is now entirely on a ‘per adviser’ basis. If the market is contracting and people are getting their own AFSLs they are fighting over a shrinking pool which puts pressure on pricing??
Something has to give here and all these mergers do is just drive costs down and the expense of service (oh sorry aren’t they all service businesses now).
We have an undersupply of advisers & quality service providers like VBP and an oversupply of licensees who all do the same thing.
If you are the ‘Chosen one’ by AMP, ie equity investor, you are no more than another quasi Licensee. Just another AMP, dressed up, whilst AMP still pulls the strings, after all they are an equity holder.
So basically it is the same as it was with the banks, just with different names. AMP and the banks were bad for financial planning, not sure why anyone thinks the new people and their desire to boost profits via vertical integration will be any different.