Combined AMP/Entireti practices to create mega licensee

With AMP selling off its advice business and Insignia moving to the Rhombus Advisory model, the top licensees have seen a significant shake-up in just five weeks.

Earlier this week, it was announced that AMP would sell off its licensee and self-licensed business Jigsaw to Entireti for $10.2 million. Entireti is the parent company of Fortnum Private Wealth and Personal Financial Services (PFS), which was formed in April 2024 following the acquisition of PFS by Fortnum in November 2023.

This will be achieved via Entireti establishing a joint venture called NewCo, to be led by AMP advice executive Matt Lawler, and AMP will retain a 30 per cent stake in this joint venture.

Furthering its exit from advice, it also sold its minority stakes in 16 advice practices to AZ NGA for the significantly higher sum of $82.2 million. The firm said AZ NGA would be able to provide the practices with access to capital to achieve scale and plan for succession.

The only advice part of the business that will remain is the salaried advisers providing intra-fund advice for members of its superannuation fund. 

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The firm has been persistently trying to stem losses in the advice division and has seen some headway on this, but first-half results for 2024 still showed an underlying net loss of $15 million. This led the firm to concede that it was unlikely to achieve breakeven, with chief executive Alexis George warning it could have seen a further loss of $40 million if the business wasn’t divested.

As a result, it has been vocal on how it is assessing alternative options which include continuing in its current state, operating it as a standalone business, or selling it off. 

This option with Entireti and AZ NGA was chosen as:

• It provides a strong partnership alliance to deliver large-scale licensee and business services, leveraging Entireti’s proven and profitable business model. 
• It will enable future investment in modern requirements for the advice practices.
• It provides AMP ongoing equity participation and management influence in the NewCo joint venture.
• Limits future risks for AMP that are associated with running a large advice licensee.
• It realises the value of AMP’s minority stakes in a portfolio of advice practices, and through AZ NGA delivers expertise and capital for future investments in advice practices.

Neil Macdonald, chief executive of The Advisers Association, said: “This is a positive outcome for our members, who are all AMP advisers. It provides them with a clear and sustainable path forward, with partners that are committed to advice and to helping more Australians get the quality advice they need.”

It is understood TAA and AMP have been working collaboratively to ensure a smooth process with minimal change for advisers who have endured “years of ambiguity” about their future at the firm.

It had sought a buyer which was committed to professional advice, took a long-term view, was not a product provider and could deliver scale and consolidation benefits and access to capital, he said.

From a business perspective, Morningstar equity analyst Shaun Ler said: “[The decision] will allow AMP to extract further value from advice businesses, which might not have been possible if owned. Notably, the sale to Entireti creates a more adviser-focused entity that could return loss-making advice businesses to profitability – something AMP has been unable to do – and benefit AMP through its minority shareholding.”

Shares in AMP rose 13 per cent after the announcement of the exit, and are up by 37 per cent since the start of 2024.

Licensee size

AMP is currently Australia’s largest licensee at 826 advisers in size across Hillross, AMP Financial Planning and Charter Financial Planning, and the firm previously noted it was seeing growth in adviser numbers after a long stagnation. 

This was helped by the appointment of Lawler as group executive for advice in July 2023 as part of a restructure, which saw advice positioned as a standalone division. This move also led to the departure of Scott Hartley from the role of chief executive of wealth management Australia, who later joined rival licensee Insignia.

Speaking in February 2024 to announce its full-year results, George said: “We would have still had a slight reduction [in advisers] in 2023, but for the first time, especially in the last quarter, we saw advice practices come to AMP. And I have to say that was a real support for what Matt [Lawler] has been doing in that space; we are seeing many more inquiries than we clearly have over the years preceding.”

In its first-half results for the six months to 30 June 2024, the firm said adviser exits had “largely stabilised and there is a renewed focus on retention and acquisition of practices”. Revenue per practice increased by 11.6 per cent from a year ago, which Ler said indicated that the “reputational damage is now behind AMP” after a difficult time around the Hayne royal commission. 

Around half of practices in the network are generating over $1 million in revenue, the firm said.

However, all three divisions – AMP FP, Charter and Hillross – have reported adviser losses since the start of the year, with the largest being seen in AMP FP which has lost 23 advisers. Entireti has not been immune either, with 20 advisers leaving from Fortnum Private Wealth and PFS following the acquisition, which is often the case as advisers hold off on joining a new licensee while the merger is worked through.

The sale is expected to be completed by the end of the calendar year and will fundamentally reshape the advice landscape.

Entireti currently has 362 advisers across three businesses, the largest being Fortnum Private Wealth which has 199 advisers, meaning it does not currently rank in the top five licensees.

But come the end of 2024 and the addition of the AMP advisers, this will bring the total for the combined licensees to 1,188. Once the 126 advisers from self-licensed entity Jigsaw are added on as well, this total will reach 1,314. This is almost twice as many as that of the second-largest licensee Count which has 682.

The large disparity gives the licensees ample wiggle room if a proportion of AMP and/or Entireti advisers opt to exit as they are unhappy with the deal; it is highly likely that Entireti will still be holding the top spot. 

Adviser numbers at AMP and Entireti:

Source: Wealth Data, August 2024

Forecast top five licensee ranking:

Source: Wealth Data, August 2024

Rhombus Advisory

The AMP move is not the only licensee change in recent weeks, with Insignia moving its self-employed advisers to a new business model.

Insignia first announced its intention to reset its financial advice operating model in July 2023 by launching a separate partnership model focused on self-employed licensees. This comprised RI Advice Group, Consultum Financial Advisers and TenFifty. 

Rhombus formally separated from Insignia on 1 July 2024, and Insignia will retain a 37 per cent stake but gradually divest it in FY25. The change sees self-employed advisers at RI Advice and Consultum move to the Rhombus Advisory licence. Meanwhile, Insignia wholly owns and retains employed advisers at Shadforth and Bridges. 

This means Insignia moves from being Australia’s second-largest licensee to dropping out of the top 10, while Rhombus Advisory sits in fifth position.

The move was largely welcomed by the market and shares in Insignia are up 10.6 per cent since the start of the year but are down by 11 per cent over one year, having fallen significantly during the five-year tenure of former chief executive Renato Mota.

Morningstar's Ler has stated that the move could rescue Insignia after a turbulent period of departing advisers, reduced flows onto its platform and lower fee revenue, and the market had forecast the Rhombus deal would force AMP to make a decision about its own future.

“We believe Insignia’s adviser network restructure is likely to solidify the firm’s reputation, reduce organic adviser attrition, minimise adviser workflow disruptions and restore morale. Efforts to streamline working processes and new technology upgrades should improve adviser productivity," he said.

As well as the separation into Rhombus Advisory, it also executed a sale agreement with Practice Development Group to return ownership of Godfrey Pembroke and its AFSL to advisers under an existing arrangement from when Insignia acquired the business.

Godfrey Pembroke joined MLC in 1999 which was acquired by NAB in a $4.5 billion acquisition in 2000. Two decades later, IOOF Holdings (now Insignia) acquired MLC Wealth, which included Godfrey Pembroke, from NAB in 2021 for $1.4 billion.

Godfrey Pembroke chief executive, Mark Pembroke, has since told Money Management that the divestment had been planned but was consistent with Insignia's ongoing restructure of advice.

“If you look back at Godfrey Pembroke’s history, it always had a desire to stand on its own as an advice business. That desire never really went away. When we joined Insignia as part of the MLC acquisition, there was an openness for Godfrey Pembroke, at some stage, to stand on its own.

“[The exit] was a desire that Godfrey Pembroke had for many years, and then it was consistent with Insignia’s strategy of recutting how they wanted advice to look going forward. It was very much an aligned view of the future.” 

Smaller players

With the top two players finally moving away from financial advice after a difficult five years following the Hayne royal commission, this has also opened up the pathway for smaller licensees to rise up the ranks.

In March, Count acquired Diverger which created a licensee with $30 billion in funds under advice and pushed the merged licensee into third position, behind AMP and Insignia, which has now risen to second place. 

Hugh Humphrey, Count chief executive, has outlined that Diverger will be far from the only M&A activity that the licensee enacts in the future.

Speaking in February, he said: "Undoubtedly, FY24 will be a transformative year for Count, especially with the scale and depth of the businesses that Diverger transaction brings. Even without the Diverger transaction, Count is expected to exceed the number of business-as-usual acquisitions compared to prior years in the form of equity, tuck-ins and services acquisitions.

“We’re very deliberate in how we target businesses for transactions that make sense strategically, that have the right cultural fit and comply with our disciplined approach around risk and capital management.”

Meanwhile, Insignia sold its Millennium3 business to Keith Cullen's WT Financial, which rose up into fourth place as it gained 140 wealth and personal risk insurance advisers.

Unlike Humphrey's heavy M&A-focused strategy for Count, Cullen said the the Millennium3 deal was a "one-off" for WT Financial as M&A is no longer part of its formal business strategy. It previously acquired Sentry in June 2021 and Synchron in March 2022.

"It’s not a driving force in our corporate strategy but we will continue to look at opportunities if they arise," Cullen said after the Millennium3 deal was completed. 

Finally, third place Centrepoint Alliance has been quieter on the M&A front but is gaining ground from adviser recruitment with a national presence across all states.

Chief executive John Shuttleworth told Money Management that the licensee is hoping to benefit from the impact of M&A activity by other licensees without needing to enact its own.

“This disruption creates market opportunities for us. For example, when two firms merge there are advisers who hold off joining it until there is stability. You need that recruitment to offset natural attrition so you can be in a position for losing advisers for 12–18 months.

“We say we want to be seen as the stable licensee in a sea of turmoil, people want to have that stability and trust from their licensee. We live and die by our service quality and ours has been very consistent. We get a lot of referrals come to us.”

All three are due to report their financial results by the end of August which will reveal further details about how many advisers they have.

With five months to go until the end of the year, there is still plenty of time for further shake-ups and the end-of-year numbers could look very different to their current form.