Advice fees push Centrepoint Alliance NPAT into positive territory

Centrepoint Alliance has returned to profit in FY21 after reporting a loss in the previous year, posting a net after profit tax (NPAT) of $1.8 million.

Reporting its FY21 results to the Australian Securities Exchange (ASX), the firm said its NPAT compared to losses of $2 million in the previous year and had been driven by revenue growth in advice fees and diligent expense management.

This “diligent expense management” included reductions in employment, travel and entertainment; the cessation of any further legacy claims from the Australian Financial Complaints Authority (AFCA); and expenses having declined by 15.7% to $26.5 million.

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The company declared a fully franked dividend of one cent per share.

It said it was “well placed” to benefit from industry disruption on margins and educational standards and that the transition to a fee-for-service model was largely complete. The new offer for authorised representatives had been completed at the end of FY20 while the offer for self-licensed firms would be completed during FY21.

During the year, it had added 16 new self-licensed firms to end FY21 with 149 firms and an additional 23 firms were transitioned to the fee-for-service model.

Chief executive, John Shuttleworth, who took over as CEO earlier this month, said: “Focusing on our core business has positioned the company with a strong platform for growth that continues to present an attractive destination for advisers.

“We enter FY22 with a positive outlook for growth and look forward to providing quality business services and support to a broader range of financial advice professionals in the year ahead.”

The firm also announced the acquisition of ClearView Advice which would create a combined entity of 1,303 advisers (comprised of 490 licensed and 813 self-licensed). ClearView’s managing director, Simon Swanson, was expected to join the Centrepoint board upon completion.

It said ClearView Advice had a “strong market position providing strategic financial advice targeting middle to upper income customers” and was an opportunity to scale ClearView’s existing infrastructure to support a larger number of Australian financial services licences (AFSLs) and financial advisers.

The transaction was subject to regulatory and shareholder approval but was expected to be completed around 31 October, 2021.

Shuttleworth said: “The acquisition creates a powerful combination of complementary intellectual property, skills, experience and balance sheet access, setting the platform to participate in further organic and strategic transactional growth as industry disruption continues”.

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We need bigger advice firms, not licensees. These mergers are a backwards step for the industry. Lots of quality people will lose their jobs and service peoviders(who do the work) will have their pricing squeezed. I'd rather have the banks back than have these clowns running things. At least banks can write a cheque when it all goes pear shaped.

I half agree with you Bill. We definitely don't need bigger licensees. But we don't need bigger advice firms either.

Compliance and supervision costs increase exponentially with the number of advisers, and in particular with the number of CARs. It is a false economy to talk about "scale" being needed to cope with these costs, when it is actually scale that drives up these costs in the first place. The "scale" argument is a myth peddled by dealer groups, whose real profits are derived from inhouse products. It is those inhouse product profits that are actually dependent on scale.

This is why AMP has been trying to force smaller practices to merge with larger ones. They want to reduce compliance and supervision costs by reducing the number of CARs. But they want to retain the inhouse product sales. The really small practices are being exited because they don't generate enough inhouse product sales to offset their exponential impact on AMP's compliance and supervision costs.

Self licensed practices without inhouse products are better off remaining small. It keeps compliance and admin more manageable, and keeps costs low.

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