An industry professional predicts the proliferation of merger activity and the birth of “super boutiques” will redefine the industry.
Speaking to ifa, Steve Prendeville, director of Forte Asset Solutions, explained that a new bout of confidence in the advice industry has invigorated mergers and acquisitions.
“Over the last five years, business owners just weren’t able to leave their business because of so many challenges that they were facing, the royal commission, the removal of grandfathered revenue, COVID, and also client annual engagement from 1 July as well,” Mr Prendeville said.
He noted that a “resurgence in confidence”, which is partly due to the Quality of Advice Review and legislative certainty, has revitalised M&A activity.
Mr Prendeville also said that the increasing number of Australians retiring serves as a significant catalyst for business growth, in addition to the $3 trillion wealth transfer, and the professionalisation of the industry.
On the latter, he added: “We’ve also got a lot more barriers on entry and compliance overlays and rising education requirements, this has all helped, for the first time really, the profession”.
This new level of professionalisation has seen the emergence of “better businesses”, businesses that, as Mr Prendeville puts it, have real client engagement, clear value propositions, and fixed fees.
“They’re dealing with less clients, but more profitable businesses are being built,” he explained.
“I think the M&A is purely reflective of rising confidence about the future.”
‘Entering the golden era of advice’
Looking forward, Mr Prendeville predicted that this lift in M&A activity will see the creation of “super boutiques”.
“Everyone needs size and scale in an environment of rising costs.”
He added that these super boutiques are expected to manage several billion dollars in funds.
“What we’ve always lacked, because we’ve been somewhat of a cottage industry over the last several years, is a brand known in the mainstream,” he said.
Mr Prendeville explained that while Macquarie probably once met the criteria of a super boutique, it tarnished its reputation by promoting its own products.
“So, we’ve never really had a brand that has reflected our worth and we’re getting that.
“So, businesses are getting larger and we’ll see the creation of super boutiques. With that, the value proposition of what an adviser actually does will become better known.
“I think we’re actually entering the golden era of advice.”
Last year, Mr Prendeville told ifa that he believes the golden age of advice is just around the corner.
“My hope after the quality review is that the clouds are going to be shifted. We’ll know where we are on commissions, on insurance. We’ll know what the landscape is, and that confidence will come back. People will be able to reinvest confidently, back into their businesses,” he said last December.
“It will be really the first time for almost a decade, that we’ve got legislative certainty. It’s with that, that you can start to make plans with a great level of confidence.”
Reflecting on the past few years, Mr Prendeville said at the time that advisers had been “shaken to the core” by “seismic change”, which came at a “great cost”.
To hear Mr Prendeville reflect on the industry click here.
Article by Maja Garaca Djurdjevic ~ 13/10/2023