Could the QAR spark more M&A in financial advice?
If banks and superannuation funds were to begin providing financial advice following the Quality of Advice Review (QAR), this advice director expects it would “absolutely spark another round” of mergers and acquisitions.
At a recent panel hosted by law firm Hall & Wilcox, Paul Aspros, managing director and financial adviser at PSK Financial Services, explored the future of M&A activity in the advice industry.
Aspros suggested that vertical integration of larger institutions, including banks and super funds, could address the affordability concerns of advice.
“Traditionally, where we’ve seen the most M&A activity in our industry is when there’s been disruption around the way that advice is paid for and how it’s delivered. Potentially, depending on where [Levy’s review] lands, it could absolutely spark another round of M&A,” he said.
“The banks will absolutely be back into wealth within the next three to five years. When they look at the advice industry, there’s great reasons for them to re-enter.”
When examining mergers and acquisitions within the sector, wealth deals were typically related to succession planning in the past.
Contrastingly, Aspros observed: “Today, most of the deals are done on the basis that everybody is looking for that holy grail of trying to be more efficient and to improve their proposition to the client.”
While smaller boutique firms offered strong client propositions and larger advice businesses would continue to expand, he expected middle ground firms to be the ‘real battleground’.
“Where we are seeing a lot of activity in our sector is in between those two [sides], where we have firms that have 15–30 people,” Aspros added.
Middle-sized businesses attempting to upscale and grow were “finding it the hardest right now to swim against the tides.”
Although these organisations could organically achieve their expansion goals within a number of years, merging with a larger firm could be the cheaper and faster option for many.
“The small boutiques will absolutely continue to flourish. The bigger scalable firms will continue to get bigger. The middle ground is where all the pain points and change is going to happen,” he said.
“It will be very polarising. I can see, in five years, where that middle ground basically either goes left or goes right.”
Additionally, the panel discussed the future of artificial intelligence and technology within the advice space.
“[Robo-advice] absolutely has a role to play within or next to advice practices,” Aspros said.
His thoughts were echoed by Sarah Abood, chief executive of the newly formed Financial Advice Association of Australia (FAAA), who also pushed for digital advice tools at another panel hosted by Hall & Wilcox.
Aspros saw two key roles that technology would play, the first being how online tools could assist advisers in more efficiently delivering advice.
“The second part is to act as an incubator for future clients. Where you have particularly
large-scale firms that have access to not only clients but children of clients, potentially a robo solution makes absolute sense to have within your stable somehow,” he explained.
“If you just close your eyes to [robo-advice] totally, over a long period of time you are going to do yourself a disservice.”
AUTHOR
Jasmine Siljic
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