Speaking on an upcoming episode of the ifa podcast, Sue Viskovic, the new general manager of consulting at Elixir, powered by Vital Business Partners (BBP), said her recent strategic decision to merge with VBP is in alignment with a growing trend of consolidation in the advice industry.
Anticipating an increase in mergers and acquisitions, Ms Viskovic echoed insights from Steve Prendeville, who recently told ifa he foresees the emergence of ‘super boutiques’ managing substantial funds.
Ms Viskovic explained that the ongoing consolidation of “one-man bands” or single-adviser practices is a persistent trend set to endure.
“It’s already happening and I can see it’s going to continue,” she said.
Ms Viskovic elaborated on the pains faced by single-adviser practices and why mergers have become the prevalent road to navigating these difficulties.
“It’s not the one man band that’s got the drum kit and the guitar and everything. Generally they’re more like a Taylor Swift, where it might be a single adviser, but they’ve got a great backing behind them and they help them deliver services. But the reality is, if you’ve only got one licensed adviser in your firm, if you can’t serve your clients for a period of time, you don’t have a business anymore. Not to mention the difficulty of trying to manage a client book and stay on top of legislative change, and get more efficient, and be aware of tools and services and opportunities to help you service your clients better. It is really hard doing it on your own,” Ms Viskovic said.
“So, it’s no real surprise to us that we are seeing a lot more consolidation of firms.”
Acquisitions are on the rise too, Ms Viskovic noted, with both external private investors and licensees recognising the value of advisory firms.
“You’ve got your external private investors, like AZ NGA, Broadleaf, and Merchant that have come in from the US. There’s quite a few of them now in the market that are happy to invest in firms,” she said.
“And you’ve also got the licensee space. I think licensees have finally realised the money is not in licensing, it’s in effective, sustainable profits of an advice firm. So a lot of the licensees are buying into their advice firms as well, which does tell you that effective businesses are in demand, it’s an excellent business to invest in.”
She highlighted the presence of a “critical mass element” that is driving numerous firms to either consolidate into larger entities, undergo acquisitions, or actively pursue joint ventures and partnerships with similar-minded businesses.
“It’s about the coming together of two businesses and the skill set. Because it’s not only the client base. People aren’t just buying books of clients anymore,” Ms Viskovic explained.
“What’s attractive about these merger opportunities is the human capital and the talent that comes with it, because you could have, and I know there are a lot of firms at the moment that have been on the acquisition trail of advisers who are retiring and getting out of advice, so then they’ve got these massive client books and they just can’t find enough advisers to serve them. So merging often, regardless of the size of both parties, it makes sense and it works really well when there’s benefit to both of them coming to the table.”
Ms Viskovic pointed to the recent merger between Elixir Consulting and VBP as a prime example.
“Size-wise, we are just less than tripling the size of staff onshore in Australia coming onboard. So with my team coming over, I think we’ll have 15 staff based here in Australia, but [VBP] has got 1200-odd staff in the Philippines. So they are a really sizable business.”
“But it’s a true merger in the sense that we are both benefiting significantly from the coming together of the two companies,” she concluded.
The full podcast with Sue Viskovic will be available on Wednesday.
[i]”I think licensees have finally realised the money is not in licensing, it’s in effective, sustainable profits of an advice firm.”[/i]
Licensees always knew the money is not in licensing. Practice acquirers know the money is not in profits of an advice firm. The money is in product distribution.
Third party companies that provide licensing services or practice equity investments are doing it to influence distribution. It’s all about inhouse product sales. Always was, and always will be, unless vertical integration is banned.
Couldn’t agree more….