Centrepoint Alliance looks to growth from higher-margin adjacencies

Centrepoint Alliance has detailed how the firm is pivoting beyond licensee services in a bid to diversify the business.  

Speaking at the firm’s annual general meeting (AGM) on 14 November, chief executive John Shuttleworth said the licensee is seeking those areas which can offer stronger earnings potential and are valued highly by the market.  

While licensee services remain the business’s core, Shuttleworth said it is valued at lower earnings multiples than other parts of the business which is prompting the firm to explore whether there are alternative segments that may present better opportunities for growth.  

In the future, Centrepoint Alliance envisions resilient organic growth occurring in its core business in tandem with the earnings potential of its higher-margin elements such as managed accounts and its IconiQ platform commercialisation. Managed accounts, in particular, grew by 40 per cent in the last financial year to stand at $423 million in funds under management.

Shuttleworth said: “We are deliberately expanding into adjacent segments of the financial services market that offer stronger earnings potential and are valued more highly by the market. Investment management and platform services, for example, benefit from scalable business models and recurring revenue streams.  

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“These segments command significantly higher valuation multiples - a reflection of their margin profile and growth trajectory. By increasing our exposure to these areas, we are positioning the group for long-term earnings growth and multiple expansion.

“This strategic diversification is not only about growth - it’s about reshaping our earnings mix. In the future as our higher-margin businesses contribute a greater share of group profits, we expect this to be reflected in a re-rating of our overall valuation.”

Shares in the company are up by 22.5 per cent over the past year to 14 November. While this is far higher than the returns of 4 per cent by the ASX 200 over the same period, it is below peers Count and WT Financial which have returned 31 per cent and 61 per cent respectively.

However, it has seen higher adviser growth than Count and WT Financial with numbers standing at 584 at the end of October, some 25 advisers higher than at the start of the year. This compares to losses of 76 by Count and gains of 7 by WT Financial, according to Padua Wealth Data.

In its FY25 results in August, the firm said its net profit after tax was $5.1 million, down 33 per cent from $7.7 million a year ago. Revenue from advice fees stood at $27.1 million, up from $24 million in the previous financial year, while revenue from salaried advice grew from $6.2 million to $8.5 million.

Use of artificial intelligence

A second factor where Shuttleworth can see opportunities is via artificial intelligence (AI) which it is using for the three-fold purpose of boosting adviser efficiency, enhancing supervision and reinforcing compliance standards. Priorities around its implementation include efficiency and automation, reporting and data analytics, adviser and staff support and compliance automation.

“While the full impact of AI on our industry remains uncertain, our belief is that it will deliver significant productivity benefits, particularly in areas such as analytics and reporting, monitoring and supervision, production of advice documentation, and streamlining operational processes.

“The first phase is ensuring we have the right infrastructure, capability, governance and training. This involves establishing policies, an AI approval committee, and comprehensive staff training to ensure safe and effective use. The second phase is the development of AI agents to enhance business processes for operational efficiency. The focus in this phase is on developing AI agents for audits, advice generation, compliance, and customer support. The third phase is the strategic application of the technology where we challenge the current business models in the markets we compete and prepare plans to capitalise on how AI will disrupt or create new business opportunities.”

Research by consultancy EY in October found 64 per cent of wealth managers said they had seen an “incremental impact” from the use of AI while a third had seen a “substantial impact”, covering products like ChatGPT, Gemini, Microsoft Copilot.

Specifically on front-office functions, 68 per cent of wealth managers said they would like to use AI to provide adviser recommendations on the next best action for clients, for personalised investment strategies and automated personalised client outreach.

“While risk management and middle/back-office use cases continue to be a core focus, strategic investment priorities moving forward include a broad range of front-office functions. Firms expect to invest in client engagement activities including lead generation, client behaviour modelling, scenario planning and various use cases supporting advisors in their client service roles,” the report stated.

Centrepoint Alliance is not the only licensee looking at the use of AI for advice efficiency as Insignia Financial is also utilising it within its 2030 strategy.  

Insignia is re-engineering the advice review process to increase the capacity and also investing in technology to capture file notes to assist with statement of advice (SOA) applications. An AI-enabled advice ecosystem will streamline and automate activities across the advice process, it said, and can be used for an AI-powered assistant, knowledge hub and client service agreements.

Chief executive Scott Hartley said: “Using AI and robotics, we are further improving straight through processing from advisers’ back office to the platform. The client services agreement fees form that goes straight through now, that’s being rolled out to all advisers as we speak, and SOAs, where removing the need for re-keying from an SOA to a new business application by the back office, that will now go straight through to the Expand platform, extracting only the necessary data from the SOA.”