Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
AMP sells major stakes in advice network to Entireti, AZ NGA in blockbuster deal
Entireti will become the largest financial advice business in Australia after the group entered a deal with AMP to acquire its AMP Financial Planning, Hillross and Charter licensees, as well as its licensees services provider Jigsaw, for $10.2 million.
As part of the deal, Entireti will create a new joint venture company called ‘NewCo’ that will hold the four entities; AMP will retain its footprint in the licensing arena with a 30 per cent shareholding in NewCo.
At the same time AMP will enter a “strategic partnership” with advice and accounting business owner AZ Next Generation Advisory, for AZ NGA to acquire AMP’s minority stake in 16 advice practices for $82.2 million.
The tie-up will see Entireti, which is the parent group of licensees Fortum Private Wealth and Professional Financial Services (PFS), count 1,300 advisers under its umbrella.
AMP announced news of the deal this morning alongside its half yearly results report, with the linked deals set to “expedite AMP’s drive to a sustainable advice proposition” after it assessed a range of ways to further slim down its advice network.
The deal has several interlinked parts. Entireti will now deliver licensing and business services to AMP’s advice network on top of its own Fortnum and PFS advisers, and it will integrate all the existing AMP Advice resources. It’s understood AMP Advice lead Matt Lawler will jump over to NewCo (which will eventually be rebadged) and lead the new venture.
AZ NGA also has a longstanding alliance with Entireti, having invested in 21 advice businesses under Fortnum Private Wealth banner and two from PFS.
AMP’s final form
AMP’s relationship with advice will continue, then, but with a broader and likely more sustainable partnership model that will see the group benefit from outside expertise, culture and branding.
The 175-year old wealth management group’s retreat from advice has been consistent since the Hayne royal commission, when it was eviscerated for a swathe of poor advice practices. The one-time biggest advice business in Australia has been letting go of its less profitable advice businesses one-by-one since, with a view to limiting a side of the business it struggled make profitable in the post-commissions era.
Under chief executive Alexis George and AMP Advice head Matt Lawler (together with Scott Hartley, who was let go in an executive reshuffle but now runs Insignia), AMP was able to stem the losses in AMP Advice, yet was not able to turn the business fully around. AMP lost $15 million in the first half of 2024, compared to $25 million in the first half of 2023.
For AMP, the deal makes sense. It shifts the running of its failing licensee business to a group with a proven model in Entireti, which has none of the reputational baggage AMP does. It still holds a stake in the businesses, yet found a group better able than itself to run them.
AMP also finds itself enmeshed in a much larger advice network once again, which creates a wider distribution path for its flagship MyNorth investment platform.
Shifting dynamics in advice
While the suite of deals will see Entireti become the biggest advice company in the land, the business of licensing is far less stable and profitable than it used to be.
The price disparity between the two sale elements highlights this dynamic. A decade ago, both deals – $10.2 million for AMP’s legacy advice groups and $82.2 million for 16 advice practices – would have seemed anomalous.
However, the once-powerful dealer groups of the industry are giving way to advice business ownership groups who take on less risk, have more expertise at business efficiency and convergence models, and can better tap into capital for growth, expansion and succession planning purposes.
Despite the $82.2 million price tag it’s paying, the Italian-backed AZ NGA looks set to make out in the deal. This is the largest deal (of many), that its CEO, industry veteran Paul Barrett, has managed to pull off. Worth noting is that at this point in AMP’s evolution its businesses have all been through several rounds of culling, which means the 16 Barrett bought are likely lean and profitable.
Barrett, who has a history of putting advice businesses through an efficiency spin-cycle, is likely to make them tighter under the AZ NGA banner, though it may involve merger activity for those businesses.
“This deal expands our national footprint, materially increases our exposure to the growing value of the advice margin and takes us a step closer to achieving our goal to be Australia’s leading professional services company,” Barrett said of the deal.
