WT Financial announces joint venture with US player

Advice licensee WT Financial Group has detailed a joint venture with the local subsidiary of New York-based financial advice investor Merchant Wealth Partners (Merchant).

Founder and CEO Keith Cullen has been appointed as managing director of what is currently being called WTL & MWP Investco Pty Ltd (Investco), while Merchant partner David Haintz will serve as executive director.

The joint entity, according to an ASX statement, will look to provide strategic growth capital to “high-potential financial advice practices across Australia”, broadly in line with Merchant Wealth’s global model.

As such, Investco will take non-controlling interests and will offer the practices it partners with long-term, “patient capital”, which it said differentiates itself  from traditionally time-limited private equity.

“Entrepreneurial practices are increasingly looking for our support in facilitating M&A activity as the profession continues to modernise and evolve to a more corporatised model,” Cullen said in a statement.

“This JV heralds a new era for WTL and for the profession. By combining our extensive national network and deep local knowledge with Merchant’s global expertise and patient capital approach, we are well-positioned to empower practices to innovate and grow. We look forward to helping the profession thrive while delivering exceptional outcomes for practitioners, their clients, and our shareholders alike.”

Haintz added that the JV aligns with Merchant’s goal of supporting ambitious advice businesses and “helping them achieve scalability, efficiency, and a competitive edge”.

“Australia boasts a vibrant financial advice landscape, where we see enormous potential for this strategy,” he said.
“Merchant’s model has proven to be attractive to growth-oriented practices looking for a partner that can provide long-term, strategic growth capital and preserve their firm’s entrepreneurial spirit.”

As Investco kicks off, the initial plan is to focus its investments in Australian financial advice practices within WT’s Wealth Today, Sentry Advice, Synchron Advice, and Millennium3 networks, providing them with expertise to accelerate their corporatisation and growth, helping them scale operations and capitalise on new opportunities.

Speaking with Money Management's sister title ifa, Cullen explained that starting with this is the perfect fit because “we're in their business every day”.

“We help them manage risk in their business every day. We help them with their marketing and their pricing propositions. We know the personalities,” he told ifa.

“We bring all of our advisers together very regularly, not just through our PD days and so on, but also through our optimum peer groups that sees them get together in small groups on a really regular basis.

“I think the most one of the most important things in professional services when it comes to mergers and acquisitions is the people due diligence. Are these people going to work well together? Is it a good fit? We're really well placed to help them figure that out.”

While this will be the initial focus, Cullen said that it wouldn’t “preclude looking at firms outside the network, particularly in supporting our practices, in making acquisitions.” The differentiator for Investco, he added, is that the firm will be taking non-controlling interests in advice firms and backing entrepreneurship, not getting in their way.

“It's [about] carefully selecting the right practices to back. We want to do that, and other than providing them some strategic support and the capital to do it, we want to get out of their way,” Cullen said.

“Merchant has been successful with this model, and that's why we'll be doing multiple of these things. There's not one answer to the best way to run an advice practice and to operate. There's not one client retention or recruitment strategy, there's not one administration strategy, there's not one pricing model or one area of specialisation.

“Our networks are a broad church, and so, we'll be supporting multiple of these hubs that can enable just about any practice to want to find a home amongst one of them, if that's what they're looking for.”

Under the terms of the JV, both Merchant and WT each hold 50 per cent of ordinary shares on issue in Investco, with Investco redeemable preference shares issued relative to each party’s future capital contributions.

“Merchant holds primary responsibility for providing the investment capital for Investco and provides global expertise, drawing on its expertise in investing in financial advice businesses around the world,” the firms said in a statement.

“WTL holds primary responsibility for opportunity origination, due diligence, and overall management of Investco, leveraging its significant local practice development and support resources and its broad local network and market knowledge.”

WT Financial added that it maintains the right, but not obligation, to match Merchant’s capital contributions.