How to ‘supercharge’ an advice business

7 December 2023
| By Jasmine Siljic |
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Paul Barrett, chief executive of AZ Next Generation Advisory (AZ NGA) believes an “army of large, corporatised super firms” is the future of financial advice businesses, and encourages small-to-medium practices to consider merging.

According to Barrett, building an industry of large-scale advice practices is the only way to financially prepare Australians for the future.

The firm’s new paper titled, Ready or Not? A Guide to Building a Super Firm, argues that our current advice composition needs change and is holding back the profession from reaching the 12.4 million unadvised Australians.

“If the advice industry’s purpose is to help people get their financial affairs in order and, ultimately, achieve their goals, then players need to supercharge their capability and capacity to see more clients, and that means getting significantly bigger,” Barrett explained.

“While small specialised businesses can do well too, we believe that size and scale create opportunities for businesses to offer a broader, deeper range of services and enhance their employee value proposition to include career opportunities.”

Smaller firms struggle to deliver a compelling proposition for clients, employees and shareholders as they grow, the CEO says, compared to larger, “better-resourced” counterparts.

He added that having increased scale ensures greater confidence that the practice will continue operating in the long term.

The five attributes of a “super” firm

Barrett’s paper writes that becoming a successful large-sized advice firm is based on five components.

These include having a:

  • Compelling employee value proposition.
  • Successful client value proposition.
  • Ideal shareholder value proposition.
  • Defined enterprise architecture.
  • Healthy corporate culture.

The chief executive continued: “To create a super firm, advisers and business owners must fuse together the things that SMEs do really well with the things that only big businesses can do.”

Speaking to Money Management in October, Barrett elaborated on the ripe M&A landscape for financial advice.

“Right now, there’s this arrival of new capital into the financial planning market in Australia. We played a significant role in validating that, and now there’s other players coming in. But that window of opportunity won’t be open forever. Financial planners who want to take advantage of this capital influx need to do it now,” he said at the time.

“There’s never been a time in the financial planning industry’s history like now. I doubt there will be in my lifetime again.”

Since 2015, the advisory group has completed 130 M&A transactions. This year alone, the firm executed 14 transactions: 10 by its member firms and four by AZ NGA directly. By year end, the company could reach 18 transactions, Barrett expected.

The CEO has now shared that approximately 15 firms in the AZ NGA network have committed to executing a “super firm strategy” over the next three to five years, through a combination of organic growth and external mergers. 

This is evident in the recent tripartite deal of Australian Unity’s advice business by AZ NGA-backed Nestworth Financial Strategists alongside Fortnum Private Wealth in November.

“We have so much conviction that advice businesses need to scale up and get bigger that building and investing in super firms has become a key plank in our refreshed strategy,” Barrett remarked.

“We want to be Australia’s leading professional advisory group, and we will achieve this by investing in high-quality advisory firms and supporting business owners to achieve their goals. Increasingly, that goal is to develop and execute a super firm strategy.”

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