Bell’s 2-year transformation to a diverse wealth manager

Bell Financial Group co-chief executive, Arnie Selvarajah, believes regulation will make the provision of episodic advice easier for consumers and is pivoting the business over the next two years to focus on wealth management. 

In its first-half results, the firm detailed how it is seeking to “transform into a more diversified wealth management business” with multiple, scalable revenue streams. It currently has 300 advisers, 300,000 clients and $87.3 billion in funds under advice.

Expanding on this to Money Management, Selvarajah said he envisaged Delivering Better Financial Outcomes (DBFO) legislation will enable people to receive advice more easily on an episodic basis.

“The shift [between advised and self-directed] will happen in reverse as advice becomes easier to deliver and more technology is used. It will straddle both sides, with clients holding a portion of self-directed assets and a bucket with an adviser engagement.

“With the new QAR regulation, it’s going to be easier to have episodic advice opportunities to receive advice on a specific part of a portfolio rather than needing full holistic advice. To provide advice on just one part currently, you still have to understand the client and provide holistic advice even if the client only wants to open an SMSF. 

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“The way you engage with an adviser today is you are all-in or you are not, and when you’re all-in, then you are paying a lot of fees. Quite often people don’t know what advice is about and can’t justify the value of it, so with the episodic advice they will be able to dip their toe in and get a little bit of advice.”

This year, it signed a partnership with platform Praemium which will allow Bell to offer a broader range of portfolio options beyond its historical focus on direct equities, in response to investor demand. The deal will see Praemium manage $6 billion in assets for Bell Potter on its Scope+ administration platform, with the migration happening currently.

He said: “We have had our own internal platform but it wasn’t scalable so this Praemium deal will give us a huge uplift in scalability and the ability to advise, service, and monitor access to other assets where we aren’t so strong today, such as unlisted managed funds, listed and unlisted fixed income, and alternatives.

“We know that a third of our clients tell us they have 50 per cent or more of their portfolio elsewhere, not with us, as they see us as an equity house, so this transition into wealth management means we can address their whole portfolio. It gives us scalability to bring more clients onto the platform and will give us a bigger share of their wallet.”

He is hopeful this progression will make Bell more visible in the future as a source of building and managing wealth beyond its reputation as a stockbroking business which it began as in 1970. He sees the migration onto Praemium being completed by the end of the year, with the business transformation taking place in 2026 and being completed by early 2027 calendar year.

However, he is mindful that transformations are gradual processes and the firm is planting a stake in the market.

“These transformations always take longer than expected. Some of this may be leading the market, but we have to be conscious if the market is ready yet. It’s about timing the market rather than just building it and hoping they come. I think our clients are ready and the regulation change will help this, so we have an opportunity now and it’s about how fast we can go. 

“Everyone deserves to grow their wealth. We want to solve that problem for people and if we can help them, then we can add value to those clients.”

Intergenerational wealth 

One reason that firms are pivoting towards the financial advice market is with the expectation of a $5.4 trillion transfer of money between generations. There are mixed responses on whether those younger generations who inherit assets will be willing to continue to work with their parents’ adviser, and wealth management firms are having to factor this into their business plans. 

For example, research by Capgemini earlier this year described the “flight risk” of clients, as 81 per cent of these next-generation high-net-worth individuals (HNWIs) said they will switch away from their parent’s wealth manager within one to two years of receiving the said inheritance. 

“Wealth management firms that proactively enhance their engagement strategies for next-gen HNWIs and successfully retain their relationship managers will position themselves for sustained revenue growth. This approach will enable greater AUM retention and secure long-term financial growth,” the report stated. 

Selvarajah said Bell is well aware of this and believes having the option of both self-directed and full financial advice will help them reach both ends of the client spectrum over time. He flagged that while younger investors may be happy to be self-directed initially, receiving an inheritance of millions of dollars would likely prompt them to seek full advice. 

The median assets for self-directed investors at Bell is between $50,000 and $150,000, but this rises to $1–5 million for those receiving advice.

“We have a strong customer base already. We are not designing this to get more clients. It’s about how we continue to service those clients across all of their needs. We know that a lot of online clients also have an adviser, and a lot of our advised clients also have an online account. 

“There’s a large portion of clients where money will transfer to the next generation over the next 15–20 years, and we know the next generation may be less open to advice than their parents, so having the self-directed option may be attractive to them. 

“Then they get into their 40s and 50s, having kids, and they may use us for an adviser instead until another point of time when they move back to self-directed. We can meet them where they are rather than being one siloed business which means they would have to leave us.”