High-net-worth (HNW) advice firm Multiforte Financial Services is to merge with Sydney advice firm Lorica Partners.
The merged entity will operate under the Lorica Partners brand, and all Multiforte staff will transition to the Lorica structure under their existing roles and employment conditions, designed to be as smooth a transition as possible for staff.
Once the deal is complete, Lorica will have $1.1 billion in assets under management, some $300 million of which comes from the Multiforte deal.
Lorica was founded in 1983, previously known as Stewart Partners before rebranding as Lorica in 2021 after the departure of founder Nigel Stewart.
Speaking to Money Management, Lorica managing director Lisa Walters and partner Brendon Vade said they had been approached by Multiforte and were attracted by the mutual investment philosophy between the two firms.
“Multiforte put the feelers out and we were mutually connected. This was early in July, but we found there was a natural alignment between the two firms,” said Walters. “It’s easy to tell if there is an alignment between the two firms so we were able to deal with it quickly.”
“They wanted to sell to achieve succession for both their clients and their team, and for it to be something they could do on their own terms rather than waiting for some issue and leaving it too late. They were proactive about making sure they could find the right fit for their team and their clients,” added Vade.
Money Management has previously discussed how succession planning is often left to the last minute or prompted by a life event rather than methodically planned in advance. Major life events which have tended to prompt thoughts of succession are known as the Five D’s: death, divorce, disability, disagreement and distress.
Described as being ‘trigger events’ for a firm, these can mean practice owners are forced to sell before they are ready and potentially fail to realise the true value of their practice. For that reason, advice firms need to be ‘fit for sale’ at all times in case they need to make a unplanned sale.
Research by Colonial First State also found almost half ( 47 per cent) of adviser respondents said the business couldn’t operate effectively without the owner, and a further 23 per cent said they were unsure of what would happen if the owner was absent from the business, making it important to consider what will happen to staff in the event of a sale.
In the case of Lorica, it said Multiforte clients will continue to work with their current advisers in the next 12 months, and the firm’s technology stack, systems, and advice processes will remain the same in this time to ensure operational continuity.
M&A plans
Nevertheless, Vade said inorganic growth is not the main priority for the firm, having only completed one acquisition prior to this when it acquired a book of clients from a retiring adviser six years ago. A merger back in 2013 with Melbourne Private Wealth, which saw the firm known as APW Partners, lasted for five years, but the “benefits of the merger didn’t materialise” which led to the two firms subsequently separating.
“M&A is not our primary strategy. We mostly grow organically through client referrals from our external professional network, but we were conscious there are other great firms out there with a similar high-quality advice process to us, and it makes sense in a lot of cases and provides a solution to succession challenges.”
Achieving scale has been a commonly cited goal of advice firms in the past year, with numerous licensees, both large and small, opting to enact M&A activity to boost their revenue and client base, but both Walters and Vade agreed it could bring about difficulties.
“Scale is a double-edged sword. It is not appropriate for everybody and you need to know what you’re getting and how you are going to achieve that goal. It’s a great buzzword, but it is not always achievable in reality,” Walters told Money Management.
Vade said: “We’re looking for sustainable growth and creating a firm with longevity that can continue to guide our clients over the long term. We want to make sure we’re around and operating well for them.
“Scale is necessary to a certain degree, but where we are quite sceptical is people say that as an excuse to try to increase the enterprise value of their firm; that is what is driving a lot of these transactions.
“It’s our observation that people who don’t do as well out of these deals are clients and staff, so we want to make sure this transaction and any others we do in the future are animated by that succession of great quality advice relationships.”
