Listed advice groups gaining ground

As banks and major financial institutions are challenged to address set backs across respective wealth and advice businesses, several listed advice groups have shown they are on to a winning model.

Growth for Centrepoint Alliance's wealth division is accelerating and reaping the rewards from a wave of investments that have been in the works for quite some time, managing director John de Zwart said.

Investing in a new chief investment officer, technology, and practice development is paying off for the company and its wealth segment - it recently reported a 29% growth in EBITDA year-on-year to $4 million in the six months to December.

Centrepoint is on the acquisition path targeting professional advice firms that "deliver the best solutions and advice to clients." Specifically these are firms generating more than $1 million in revenue and smaller firms with $500,000 in revenue but are growing fast, de Zwart said.

"We're happy to help facilitate the restructure and change management to those advice firms and take them on that journey," he said.

He adds that Centrepoint doesn't use the financial incentives some of the big institutions are employing; rather focusing on the value they can offer to the advice firm and their clients which "seems to be winning out."

Half-year results at AMP and IOOF showed 2016 was a challenging year for the respective financial advice divisions, but the institutions' diversified business models are likely to improve with new initiatives and an emphasis on cost reduction.

AMP chief executive Craig Meller said a record number of advisers opted to retire or leave the industry in the wake of increased professional and education requirements, though AMP doesn't expect the fall in adviser numbers to materially impact future earnings.

"Many of those who have left did not contribute to cashflows in the last two years and we also know that 2016 has been a tough environment for our advisers. Our focus in 2017 will be on helping them improve processes and productivity, enabling them to spend more time with their customers," Meller said.

Yellow Brick Road's wealth management division has also placed an emphasis on increasing client facing time. But it's also positioning itself differently in an effort to boost margins, broaden services and improve efficiency.

YBR wealth division general manager Adam Youkhana has introduced a new customer relationship management system, Provisio, that enables 80% of advice recommendations to be written in-house, together with a phone-based advice system for life insurance and superannuation customers.

In the first half of FY17, Yellow Brick Road reported a maiden profit and an underlying EBITDA of $3.1 million (excluding non-operating costs). It is a significant improvement from the $2 million loss on the previous corresponding period. A key driver was the wealth business, with revenues up 25% on the comparable period.

This is an extract of a news story first published in the latest issue of Financial Standard. You can view the full article on our iPad app.

Read more: Yellow Brick RoadAdam YoukhanaCentrepoint AllianceCraig MellerJohn de ZwartProvisio
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