Keith Cullen discusses WT Financial Group's strategic acquisition of Millennium3

Keith Cullen discusses WT Financial Group’s strategic acquisition of Millennium3

Paul Sanger: I'm Paul Sanger for the Finance News Network. And today, I'm talking with WT Financial Group (ASX:WTL) and they have a market cap of 29 million. Over the past two years, WT Financial Group Limited has established itself amongst the very largest financial advisor networks in Australia. Its wealth management, retirement planning, and personal risk Insurance advice services are delivered primarily through a group of privately owned advice practices whose advisors operate as authorized representatives under the Wealth Today, Century Advice, and Synchron Advice subsidiaries. The Group's B2C division delivers a range of financial advice services directly to wholesale and retail clients through its Spring Financial Group brand.

We welcome today WTL CEO, Keith Cullen. Keith, welcome back to the Network.

Keith Cullen: Thanks, Paul. Thanks for having me back.

Paul Sanger: Now, Keith, you've recently announced that WTL has agreed to acquire the Millennium3 financial advice network from Insignia for two million with settlements scheduled for mid-December. Let's start. You built your network through a series of acquisitions over recent years. Kenny, walk us through the process behind this acquisition.

Keith Cullen: Look, Paul, it's interesting because I think last time I was here I said that we weren't. You asked me about, or might've been Abby asked me, about whether we were targeting more acquisitions. And I said we'd grown the business to the sort of scale that we thought was appropriate to underwrite all those critical supports and advisors needed, and so that it wasn't part of our overall strategy, but I did say that if opportunities came along, we'd look at them on their merits.
And Insignia Financial approached us a few months ago and said that they were looking to sell Millennium3 or M3, as it's known in the market. And, look, it's a very good fit for us, Paul, so it was the opportunity to look at. It was too good to refuse.

Paul Sanger: And what natural synergies does the M3 business bring to WTL and how long will it take to integrate the business onto your platform?

Keith Cullen: Look, this is what made it so attractive for us, Paul. The first thing I'd say is that as we've brought all of our acquisitions together over recent years, Wealth Today, Synchron, and Century Group, is we've plugged them all into a central support hub that we call Wealth Advisor.

We've been able to maintain the collegiate spirit and those brands that the advisors are so used to being a part of on the front end, but to get the efficiencies and ensure we're delivering a broad range of services to the advisors and the same range of services to all of the advisors, is we brought that central hub into play. And this is the same sort of way that Insignia had been running their advice networks with some frontline staff that deal directly with the advisors, but most of the services delivered through a homogenized back office across all of their different brands. So, it's a perfect fit for us to be able to pick it up, unplug it from Insignia, and plug it into our operations.

The same technology's been used on all of the critical things like advisor education and training, the software that the advice practices use, and also the commissioning systems and so on, all exactly the same. So, it's very synergistic in terms of being able to unplug it and plug it back in. In terms of the logic underlying it or where we saw the opportunity for the advisors, but they're going to find a very kindred spirit amongst the advice professionals that we've got in the network is Millennium3 has a significant amount of wealth advice within the business and a significant number of holistic advisors, but it's also got a very proud history and a very proud lineage in personal risk insurance. And they'll find a really good home with us in that because it's in our blood as well.

Paul Sanger: Now, Keith, WTL is already amongst one of the largest advice networks in the country post the Millennium3 transaction. What will be your advisor footprint and what size of funds will you have under management?

Keith Cullen: Yeah, good question. Look, Paul, right now we're around 400 practices and a bit over 500 advisors when you take our general advice advisors in there that are part of our Wealth Today Network. So, this is going to add about 75 practices to us, so pushing us up towards 500 practices, and it'll take us over 600 advisors in total.

In terms of funds under advice, around 23 billion is where we're going to land. So, we're about 18 or something thereabouts at the moment. And so, Millennium3 advisors are advising on about five billion. So, it'll take us up to about 23.
And then, significantly from a personal risk insurance perspective, is we were already amongst the largest, if not the largest, personal risk insurance network in the country. So, when you added together Wealth Today and Synchron, and Century, so adding Millennium3 in there is going to take us well over $450 million of enforce premium, and I'd be surprised if any other network comes close to that now.

Paul Sanger: Now, Keith, there seems to be a flurry of activity among the ASX-listed licensee businesses. Let's talk about accounts, recent acquisition of the risk-focus Athena licensee for 3.3 million from life insurer Tao is an example of this activity. Then, we had the divergent unsuccessfully bidding for center point a while ago, count subsequently agreeing a takeover on Diverger and counter offer from COG Financial, who now merged with a 19.9% of CenterPoint and so on. So, an off-market things seem just as fluid, with Australian Unity last week announcing he had sold the Australian Unity Personal Financial Services AFSL to privately held Fortnum. What, in your view, is driving the interest in this sector?

Keith Cullen: Well, look, I think if we go back to 2018, in the wake of the Royal Commission, you might remember then Paul, our business was really direct-to-consumer focused. That was where we'd started. But in 2018, we saw an opportunity to be countercyclical when in the wake of the Royal Commission we saw the unraveling of the vertically integrated models. The banks and insurers had gone on board up all of the advice networks or a lot of the advice networks over the 10 or 15 years prior to that. And we thought this is going to unravel. Advisors need a good home where they've been supported by people that understand their business from the position of being in the room with a client and trying to run a practice.

But a lot of people thought we were a bit crazy at the time, I must say. Some people accused us of running into a burning building and perhaps at what we did do, to an extent, we saw the opportunity. And we think it's really starting to pay dividends now, which is getting these advice practices back into the hands of people that understand what it's like to sit in the room with clients and build a practice. And I think what we're seeing at the moment is people are starting to recognize that. They're recognizing the opportunity. Yes, there's been turmoil from a regulatory perspective, but the opportunity hasn't gone away in terms of the demand for advice. We've seen advisor numbers come down by about 10,000 in Australia to where they sit now about 15,000.

At the same time, we've seen barriers to entry set high. It's not easy to become an advisor now. A four-year relevant degree, a professional year. So, supply has been significantly constricted at the time when demand is through the roof. We've got a wall of capital coming into retirement, we've got a wall of people coming into retirement. The 65-plus market pool between the last two census, when the Australian population grew by 8%, it grew by 19.1%. So, there's this wall of people coming to retirement.

Superannuation assets are now $3.5 trillion, so there's a wall of money coming. There's this intergenerational wealth transfer we keep hearing about, and I see advisors' eyes glaze over because they worry that this money's been passed on to millennials and so on, and they're going to need to work out how to deal with a younger cohort. The reality is, it's not millennials getting it. It's baby boomers passing it to the Gen Xers, and they're the people that advisors are used to dealing with and they're comfortable with that sort of 45 to 65 market. So, I think people are just waking up to this significant supply demand imbalance. At a time when regulation gets more complex for consumers, they need help, they need advice. And so, we saw it back in 2018. I think others are waking up to it now, and we're just loving having a bit of attention on the sector.

Paul Sanger: And just to finish up, let's go back to the regulation. It's debated heavily in the papers on a daily, weekly basis. We come to the end of the year. Do you think there's going to be any progress changes in '24?

Keith Cullen: Look, I think there will be. I'm on record of saying that anyone that's been critical of this government and this minister for not acting fast enough just needs to understand that there's been a massive regulation over 10 or 15 years. So, it's quite a big egg to unscramble. And there's a lot of us in the space that say, "Look, there's challenges, there's red tape that can be cut, and there's bigger reforms that can take place to improve the accessibility of advice to the many Australians that are needing it. But right now, we know what we've got at least. The last thing we need is knee-jerk reactions, more legislation on top of more legislation."

So, the government has indicated they're very keen to look to some simple things that'll cut red tape. There's a number of compliance things in our game without delving into too much of the detail of it that are just straight out duplication. We're doing things twice, which pushes costs up on consumers, which is not good. So, they're seeking to act on that.

And then, I think they've got this broader reform agenda that is really important to open up advice to more Australians that just need simple advice. They don't need a financial planner to sit down with them for hours on end. They're looking for simple transactional episodic advice. This government's motivated to get there. I'm just keen to see them do it properly. And if that means waiting a while, I think that's probably good for everybody to make sure we get it right.

Paul Sanger: Keith Cullen, it's been an absolute pleasure. Thanks for taking the time today.

Keith Cullen: Thanks, Paul. Appreciate it.