Refining tech crucial for advice M&A prep
Intelliflo has encouraged financial advice practices to improve their processes and data management prior to seeking M&A opportunities.
The technology provider’s white paper, titled Advice, evolved: A new era in Australian financial advice, identified seven trends that are set to characterise the profession over the next five years.
These are:
- Changing the perception of advice
- Adopting consumer-friendly payment models
- Technology as the foundation
- The next frontier – an adviser-led system
- Reaching more Australians through scale
- Building a whole-of-life pathway
- Engaging young people
Honing in on the fifth theme, intelliflo explained that scale remains critical to tackling the accessibility issue in advice, with just one in 10 Australians currently seeing an adviser.
Unsurprisingly, many practices are considering mergers and acquisitions as a way to achieve additional growth and scale. This comes amid the entry of global private equity firms in the Australian wealth management industry.
“The financial advice sector is set to become a major target for M&A, with a flurry of activity already under way and more expected in the next five years,” intelliflo’s report stated.
“Big money is flowing into Australia and looking for takeover targets, while practices with growth intentions are increasingly seeing opportunities to partner up with other businesses.”
The main challenge for advice practices moving forward is aligning their processes, culture and business goals if they are to seek out M&A opportunities. If firms are using different technology stacks, for example, this can create difficulties during the integration process, underscoring the importance of forward planning.
The white paper continued: “Standout advice businesses in the M&A market are building their valuations by clearly and simply articulating how they formulate and deliver advice and demonstrating organic growth. Practice mergers tend to fall over when the two prospective businesses cannot align on their style of working.”
From a prospective buyer’s point of view, an advice firm’s potential often relies on its data processes as well, which can be quite poor in many circumstances.
“In the UK, ‘consolidators’ work with practices to validate their data and provide an independent assessment. This is a trend we’re likely to see more of locally as the M&A market booms.”
Intelliflo encouraged advice leaders who are preparing their business for a sale or merger to clearly communicate their style of working, culture and goals, while also improving data management prior to prospective buyers making a bid.
Money Management previously explored the ways in which M&A deals can go wrong, such as a lack of cultural alignment.
“I’d never buy another business if you have too many differences culturally, the clients have different expectations, and the advisers that come with it are different. It’s like herding cats,” commented Jurgen Schonafinger, director and financial adviser at Templeton Advice Group.
AUTHOR
Jasmine Siljic
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