The National Australia Bank’s $115 million purchase of Deutsche Financial Planning and Deutsche Funds Management are in many ways a watershed for the financial planning industry.
This is not because NAB paid an extraordinarily high price for the financial planning and master trust group – even though it was the highest multiple ever paid in Australia. Nor is it because Deutsche decided to exit the financial planning market to concentrate their retail efforts on independent financial planners – that is the nature of global decision making today.
The really ground-breaking aspect of the deal is the amount of attention paid to the 65 financial planners that make up the dealer group. Not only did the 18 so-called “affiliate” planners get paid a substantial sum to join the NAB owned Godfrey Pembroke group, but they were also closely involved in all the negotiations.
This is not the first time that advisers have successfully lobbied to get a share of the takings from an acquisition. But it is the first time that a group of advisers have had so much baring on the outcome of acquisition negotiations.
Going back as far as the Mercantile Mutual acquisition of Le Fort, the owner of the RetireInvest dealer group, advisers have been dealt a portion of sale proceeds. But never before have they been part of the decision making process on just who is to become their new owner.
What the prospective buyers of the group realised early on was that they not only had to come up with a substantial sum to buy the businesses but they also had to convince the financial planners that they could accommodate the culture of Deutsche Bank Financial Planning. The Deutsche planners say they were not necessarily seeking the best price for the group, but were seeking the best fit for their financial planning practices.
After all, if the advisers decided to walk, there would be very little value in the planning group. Deutsche would never allow its name to be used by a rival financial services group so there virtually no brand value attached to the deal.
The real value was the quality of the financial planners and, even more importantly, the quality of the high net worth individuals that make up the Deutsche client base.
Apparently, NAB had all the right ingredients. From all reports, the Deutsche planners are all happy to be joining the highly regarded and similarly structured Godfrey Pembroke group. And because they were involved throughout the negotiations, rather than merely receiving a hand-out at the end, they are likely to take on the vision of the Godfrey Pembroke group and remain with them even after the two year golden handcuffs are removed.
The lesson for dealer groups looking to sell-out and for institutions looking to buy in is to ensure the financial planners who form part of the group are involved in the process. Sellers may end up getting a better price and buyers may find they have a better long-term prospect with more loyal advisers.
