Sequoia looks to licensee switching for adviser growth

Sequoia Financial Group chief executive, Garry Crole, has ruled out acquiring another licensee and instead hopes to benefit from adviser switching to boost numbers. 

In its first-half results for the six months to 31 December, the firm elaborated on its M&A plans for the year ahead. 

While there is likely to be acquisitions in the professional services space, it ruled out following the path of rival Count in acquiring another licensee.

Crole said: “It’s unlikely we’d buy another licensee, it just opens up opportunities for competitors. Some of the licensees that have been acquired over the period, the advisers there didn’t want to be acquired and started looking for new homes, and we have been a beneficiary of that. 

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“Groups like AMP, Viridian have seen a lot of advisers leave them because of that so we are not going to play that game.”

The firm’s results showed $50.9 million of its total $62.8 million came from the licensee services division, and there was an increase of around 60 per cent in revenue per adviser.

Crole added: “Licensee services has seen revenue increase dramatically; we are winning. There’s been a lot of movement in the industry from groups like Insignia and Diverger, and a lot of advisers are looking for new licensees. 

“Sequoia and InterPrac have been the real tortoise. We have been very stable, and the market respects our licence. We are getting inbound inquiries from advisers on a regular basis where most licensees had a deterioration in overall numbers, while we’re +33, and that’s pure organic growth. We are well placed for that to continue and to scale up.”

The firm highlighted in the past that it is targeting 500 advisers by 2026, which will be achieved by acquiring adviser licensing services from subscale AFSL providers. 

“We will consider bolt-on acquisitions in InterPrac where we are acquiring customer books from financial planners in our network and outside the network. Typically, those are someone who is looking to retire in three to five years and doesn’t have a natural person to transition that book too. We will definitely look to do many of those. 

“Our experience with that has been very positive. It’s a good model and much more profitable one.”

However, while it ruled out a full acquisition of another licensee, it does hold a 6 per cent stake in rival licensee Centrepoint Alliance and previously held a stake in Diverger. 

“The board has been very supportive of the advice industry, we share that view and Sequoia believes there is no licensee we can’t do business with, so taking a strategic stake is my way of showing an interest in working together. They have some services that we could use to make Sequoia a better business, and we have some we could provide them. 

“We don’t have to buy it in total, but we thought the stock was cheap, the management is good, and the proposition to market is positive, and we expect to get more than 15 per cent return on that investment and create synergies from other opportunities.”