Count CEO on the high cost to scale up an AFSL
Despite major M&A deals, the financial advice market still remains very fragmented compared to other industries, according to Count chief executive Hugh Humphrey.
In the past year, two major advice deals of Count acquiring Diverger and AMP selling its advice and self-licensed division to Entireti have created large licensees, with Count holding 512 firms on its Australian Financial Services Licence.
But, while Count is now the second-largest player in the market and has successfully integrated Diverger, Humphrey disagrees that the advice market has industry leaders.
Speaking with Money Management after the firm’s half-year results, he said: “We didn’t include authorised representative numbers in our results as we think that is an imprecise measure. We are trying to shift the dialogue to qualities of firms, such as ‘How many clients do they have? What are their funds under management, their revenue? How productive are they?’
“Financial advice is still very fragmented. Even the largest players still have single-digit market share, unlike telecoms or platforms.”
The firm completed six acquisitions in the half-year, four of which were equity partnerships, and Humphrey said the firm typically completes an acquisition every three to four weeks.
Its inorganic growth strategy is divided into four parts: direct investments, transformational investments, bolt-on opportunities, and equity partnership mergers.
- Direct investments – Investment into scaleable and high-performing firms to help Count grow its footprint.
- Equity partner mergers – Those that present a strategic opportunity to enhance leadership and scale within equity partnerships of a similar size and scale.
- Transformational investments – Those that deliver a material increase in scale, cost synergies, and productivity such as Diverger.
- Bolt-on opportunities – Highly accretive transactions to existing equity partnerships with opportunities to add or cross-sell financial planning services.
Humphrey said: “We will continue our pace of M&A across four sectors. So long as the consolidation benefits the advisers and the accountants, then it’s a worthwhile strategy.
“There is a lot of consolidation still to go. It’s important for us to be scaled because having scale allows you to invest in capabilities and technology that other firms do not do. You need deep pockets to invest in this space.”
Last year, Money Management spoke with two advisers who discussed the pros and cons of scaling up an advice practices and the benefits it had brought to their practices.
Humphrey gave the example of how the firm has an in-house cyber offering, which helps Count firms with their technology stack, as well as a separate technology offering for firms to develop solutions to make them more efficient advisers.
As a result, Count advisers are 23 per cent more productive at delivering complex advice and can see more clients than the average adviser, he said.
In its financial results, it said statutory revenue was $73.9 million, an increase of 54 per cent on the prior corresponding period. Statutory net profit after tax (NPAT) was $5.3 million, up from $2 million a year ago.
Funds under advice (FUA) were $36.2 billion and funds under management (FUM) were $3.5 billion. It noted FUM was helped by the increased adoption of separately managed accounts.
AUTHOR
Laura Dew
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