Newly created wealth management group Centrestone signalled its serious intentions from the outset with two substantial acquisitions — prominent high-net-worth financial planning business Investor Security Group (ISG) and risk insurance advisers P&A — which formed the basis for the new group’s emergence.
The addition of ISG to the Centrestone model means the latter now has assets under advice in excess of $522 million, while P&A tipped in with a $1 billion life insurance portfolio.
The group is continuing to push hard, with joint chief executive Michael Pillemer saying the business plan for the year to July 2003 has already been exceeded and expects funds under advice to surpass $1 billion by next June.
“We anticipate purchasing five to 10 financial planning businesses per year. The focus is not on growth for growth’s sake. We want quality planners who have profitable businesses, who can deal with sophisticated clients, who are attuned to a fee-for-service approach, and who recognise the need for uniformly high standards of advice and service to build a premium brand,” he says.
Pillemer identifies two categories of dealers that the group is interested in. The first are dealers who were part of an independent group and now find themselves part of a big financial institution as a result of acquisitions. The second group are boutique dealers who recognise the synergies in joining Centrestone.
Centrestone’s approach is to buy the businesses via a mix of an initial capital payment and income flow over time. Pillemer adds that the group will never have in-house asset management or insurance products “so as to preserve our absolute independence”, but will make in-house decisions around asset allocation and specific investment fund managers.
The same investment philosophy was used within ISG, which produced an average annual return of 10.1 per cent for clients from 1991 to 2001, while over the past year its return has been three per cent.
Pillemer, his brother Russel, Michael Dunne (chief operating officer) and Malcolm Turnbull founded Centrestone, when the four joined with Rob Keavney (joint chief executive) from ISG, Roy Agranat and other Pillemer brother, Jon, from P&A earlier this year with millions of dollars of capital sourced through 30 shareholders.
Michael Pillemer says the driver behind the formation of the group is that “an increasing number of Australian families have over $500 000 of investible assets, yet the Australian market has no premium financial planning brand in the affluent and high-net-worth market”.
With many financial planners pitching at this market, where does Centrestone differentiate itself?
Turnbull believes “many financial planners talk about servicing the high-net-worth market but no independent group of any size actually concentrates there. Both the timing and the gap in the market represent an extraordinary opportunity.”
Pillemer says: “The business brings together numerous competitive advantages. With no institutional shareholders, we can provide advice without compromising the clients’ interests. At the same time, our shareholders provide direct access to the affluent and high-net-worth market. This enables us to buy the businesses of successful advisers without compromising their independence.”
