Shadforth CEO Terry Dillon says the time is right to pursue inorganic growth as it seeks to double in size by 2030 and acquires a Melbourne advice firm.
It was announced on 1 October that the salaried advice business of Insignia Financial, which focuses on high-net-worth advice, would acquire PMD Financial Advisers in Melbourne. This deal will bring across five staff and 388 clients to the Shadforth network, as well as $700 million in funds under advice.
The firm was chosen, Dillon told Money Management, as their average client size and revenue are “almost a mirror” of the existing Shadforth client base.
“The clients look and feel like Shadforth clients already, they are receiving total balance sheet advice from a private wealth offering, they have a similar average client size, they offer a similar service and are a wonderful fit for us. The advisers are high quality with long successful careers and we want that to continue, it was an easy deal to be interested in,” he said.
Choosing an advice firm which is a good fit and cultural alignment with Shadforth is the key to a successful deal, he said.
“We want businesses who have a common view to us, we don’t want to be an aggregator bringing disparate businesses together, we want people who believe in the same things as us. It has to be a good fit; if we are twisting someone’s arm to provide holistic advice or having an evidence-based investment philosophy then they aren’t the right firm for us,” he said.
This is the first major M&A deal the firm has made in recent years, as it has preferred to focus on organic growth and training its 94 advisers in-house, as well as 63 associates.
However, if the firm wishes to achieve its growth targets on track, then Dillon said M&A is now the right approach to take if it wants to double in size and that the PMD will be the “first of many” for the business.
As part of Insignia’s 2030 strategy, CEO Scott Hartley has been vocal on how he wants to increase revenue per adviser and clients per adviser across Shadforth and its mass-affluent arm Bridges. Strategic priorities for Shadforth were to accelerate new client growth, lift adviser efficiency and capacity, grow adviser numbers and a step change in growth.
Dillon said Shadforth is seeking to increase funds under advice (FUA) from $17.5 billion to $35 billion, increase clients from 10,400 to 20,000 and increase revenue from $108 million last year to $220 million.
It is already in talks with several firms and specified it wants to work with firms that have a clear investment philosophy and who serve HNW clients, but Dillon said it was important for Shadforth to work on itself and have its own house in order before pursuing any M&A.
“We are looking to double in size by 2030 and if we rely only on organic growth then we can get a long way towards that doubling but we don’t quite think we will get there. So that’s where selective, tuck-in acquisitions will help us to achieve that goal,” Dillon said.
“We are in a strong position to grow dramatically and we can do some on our own but we also have an opportunity with PMD which has great clients and great advisers to help us reach that.
“We have really strong organic growth already but these sorts of acquisitions will be the cream on the cake.”
