Foreign capital continues to fuel domestic expansion, offers model for growth

One practice that has seen continued growth through foreign capital is Coastal Advice Group, which has been expanding its network of largely regional practices for the past 12 months.

Backing this expansion has been New York-based capital partner Merchant Wealth Partners. Since January this year, Merchant has been providing capital and logistical support to Coastal, fuelling a flurry of acquisitions including Calder Wealth Management in July.

Most recently, Coastal has acquired NSW-based practice RetireInvest Clarence Valley and Mid North Coast, with Coastal now claiming to be “Australia’s fastest-growing financial advice business”. It has also confirmed that West Australian-based firm SRM Wealth Solutions will be joining its network.

“Our growth is not just about size, it’s about people,” said Daniel Brown, executive director of Coastal Advice.

“This growth is as much theirs as it is the company’s and our priority is ensuring that every new opportunity we create benefits our team as much as it benefits our clients.”

Coastal’s expansion, particularly in regional hubs, has also given the company access to a client base in need, with the banks many of these communities relied on for financial services leaving in droves.

For providers of foreign capital, local practices such as Coastal are an attractive prospect for investment and help provide a stable model for growth, offering a shield against growing economic instability overseas, such as Trump’s “Liberation Day” tariffs and conflict in Ukraine and the Middle East.

“[Australia has a] known legislative environment, is politically stable, and has a stable American dollar relationship,” Forte Asset Solutions founder and director Steve Prendeville told ifa in July.

“It’s really hard to blow up these businesses.”

Prendeville also highlighted that most financial advice practices operate on a high level of profitability, with many being in the “high 30s to 40 percentile”, as opposed to the average business operating at 28 per cent profitability.

For domestic advice firms looking to expand, attracting foreign capital not only means not having to work from their own balance sheets, but logistical support as well.

“[Australian firms] want that corporate oversight. They want capital plus,” Prendeville said.

“For instance, it could be that they’ve got internal HR services, they’ve got legal services. All of a sudden, this is where we start to look at capital plus.”

With domestic pressures mounting on advice firms, such as a shrinking pool of professionals, rising operational costs and the CSLR levy, attracting foreign capital partners such as Merchant can offer stability and a route to expansion.

“We’ve got a rising cost production and so we’re starting to see that in our labour costs, because the talent pool [of experienced advisers] is diminished,” Prendeville said, with the access to this capital freeing up firms to expand and be protected from the financial risks associated with doing so.