The advice industry’s current structure and composition are holding it back from reaching the 12.4 million Australians who need professional advice but aren’t receiving it, AZ NGA has claimed.
AZ NGA’s latest white paper highlighted that the only way the industry can achieve its mission of financially preparing Australians for the future is by “raising an army of large, corporatised Super firms”.
“If the advice industry’s purpose is to help people get their financial affairs in order and, ultimately, achieve their goals then players need to supercharge their capability and capacity to see more clients and that means getting significantly bigger,” commented Paul Barrett, the paper’s author and AZ NGA chief executive.
According to Mr Barrett, while small to medium-sized enterprises (SMEs) play an important role in the advice landscape, a new category of “Super firms”, akin to mid-tier firms in accounting and professional services, are the key to meeting Australia’s unmet demand.
“While small specialised businesses can do well too, we believe that size and scale create opportunities for businesses to offer a broader, deeper range of services and enhance their employee value proposition to include career opportunities. It also gives a firm’s people, business partners and clients greater confidence that it will be around for the long term,” he explained.
In October, Forte Asset Solutions director Steve Prendeville echoed this, projecting that the industry’s lift in M&A activity will see the creation of “super boutiques”.
“Everyone needs size and scale in an environment of rising costs,” Mr Prendeville told ifa.
He explained that while Macquarie probably once met the criteria of a super boutique – specifically, being a brand known in the mainstream – 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.”
The ‘blueprint’ of the super firm
AZ NGA’s paper further identified the five characteristics that make up the “blueprint” of a super firm, including a compelling employee value proposition, client value proposition and shareholder value proposition, a defined enterprise architecture and a healthy corporate culture.
Specifically, the company said that in an increasingly competitive employment environment, more ambitious firms will be in a stronger position to attract and retain talent.
This was in addition to being able to demonstrate a capacity to deliver growth opportunities and margin opportunities to capital investors.
Regarding client value proposition, AZ NGA noted that for a business to understand its client segment and their challenges, to become specialist problem solvers and to think like entrepreneurs, added capability and capacity are required.
“As advice businesses grow and increase in size, smaller firms will struggle to deliver a compelling proposition for employees, clients and shareholders relative to larger, better-resourced counterparts,” Mr Barrett said.
As such, around 15 firms within AZ NGA’s advisory network have committed to pursuing and executing a super firm strategy over the next three to five years.
This will predominantly involve a combination of organic growth and M&As, Mr Barrett explained.
This was echoed in AZ NGA’s paper, which underscored the importance of all businesses having a plan in place for mergers, acquisitions and organic growth, with varying levels of focus between the three.
Mr Barrett said: “We have so much conviction that advice businesses need to scale up and get bigger that building and investing in Super firms has become a key plank in our refreshed strategy.”
“It’s time to get excited about the future and build momentum by learning new skills and growing.”
