Financial advisers find new niche breaking away from the pack

Financial advisers are chasing the money as more people move into the high net worth ranks, resulting in more bespoke firms and more industry consolidation.

Koda Capital CEO Paul Heath and chairman Steve Tucker. Picture: Chris Pavlich

Australia’s high net worth financial advisory business will see a small group of top players breaking away from the pack, leaving others behind, says former partner at Pitcher Partners, Charlie Viola says.

“It will be a bit like the Tour de France,” he tells The Deal.

“There will be a lead pack of really high-quality businesses which break away from the rest of the pack and then the remainder of the peloton who will find it hard to catch up.

“They will still have a smattering of good clients and advisers, but the major inflows and client attention will go to that pack of high-quality businesses.”

Find out who made the Top 150 list. 

This article is from The 2024 Barron’s Top 150 Financial Advisers magazine which is published in The Australian on November 21.

Not surprisingly, Viola argues that his new firm, Viola Private Wealth, which he has spun out of Pitcher, with initial funds under management of some $2.4bn, will be one of those leading the pack.

“We want to build a business which is synonymous with the private wealth space,” Viola says.

“While the Pitcher name is a good, strong one and it does great work across many business lines, it is a much more diver­sified business. We want to be bespoke and specialist in helping high net worth clients.”

Viola’s move to set up his own advisory business is the latest in a series of changes in the high net worth advisory sector.

The latest World Wealth report from the Capgemini Research Institute estimates that the money owned by high net worth ­people in Australia grew by 7.9 per cent in 2023 – easily outstripping the global average of 4.7 per cent.

It estimates that the total funds held by high net worth individuals here has hit a record of more than $US1 trillion ($1.51 trillion), held by more than 330,000 ultra-wealthy people.

The firm defines high net worths as those having assets of more than $US1m, excluding the family home, collectables and ­consumer goods.

Wealth earned by entrepreneurs and investors, with booming share and property markets and a growing intergenerational transfer of assets in Australia are some of the forces behind the growth in the high net worth demographic.

Financial adviser Charlie Viola from Viola Private Wealth. Picture: John Feder/The Deal

Philanthropy Australia estimates there is about $2.6 trillion in Australia set to be passed to the next generation.

New beginnings

Changes in the sector have seen executives such as Viola go out on their own to set up advisory businesses. Koda Capital, which was founded in 2014 by former MLC chief executive Steve Tucker, and former JBWere chief executive Paul Heath, sold a minority stake to the New York-based Emigrant Partners in 2022.

Other recent events include Focus Financial Partners buying a strategic stake in Escala, and EFG International becoming a ­majority shareholder in Shaw and Partners.

Meanwhile, UBS, the largest wealth manager in the world, r­e-entered the private wealth advisory business in Australia last year, following its merger with another Swiss bank Credit Suisse.

UBS exited the sector in Australia in 2015 with a management buyout, as former UBS executives formed a company called Crestone.

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“Australia is a relatively young country and is experiencing significant wealth transfer in large numbers for the first time.” - Steve Tucker

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In 2022, the firm was bought by the private banking and asset management arm of the Princely House of Liechtenstein, LGT International. Led by former UBS executive Michael Chisholm, the firm now trades as LGT Crestone.

The market is also watching developments at Perpetual following its sale to US private equity player KKR, and Commonwealth Bank’s plans to sell off its private advice business.

Viola, who started his career as a bank teller with CBA in 1996, was pivotal in setting up the wealth management division of Pitcher Partners, where he has worked for the past 21 years.

He is now executive chair and an adviser in his new firm with Sean Ward as chief executive and Andrew Levi as chief operating officer. Viola is one of two key advisers at the firm, including former Test cricketer Peter Nevill.

Viola’s goal is to have 12 to 15 advisers in his firm in the next five years. Regularly appearing in the top ranks of the annual The Deal/Barron’s Top Financial Advisers list, Viola is backing his reputation in the sector with the argument that his business is independent and not part of a broader financial institution.

Various players are arguing the merits of their changing business models.

Koda Capital’s Steve Tucker, whose business now manages more than $14bn in client assets, argues the investment by US firm ­Emigrant allows his firm the best of both worlds – a combination of independence through its voting structure, with the capital injection and broader support from the offshore backer.

The deal has been structured so that Koda’s staffers - 130 people, including 53 partners across four offices - own 98 per cent of the voting stock.

Tucker says the investment by Emigrant provided Koda with the capital to fund the next stage of its growth, including the acquisition of Redwood Wealth Alliance in Perth in 2022. He says it has provided the firm with “valuable insights and know-how in areas including best practice in technology and operations, financial adviser acquisition strategy and funding” as well as insights into the wealth advice business.

The deal has resulted in Koda’s assets under advice growing by more than 30 per cent in the past two years.

Tucker says the deal allows Koda to function as an independent private wealth firm “with the scale and strength” to ensure it can continue to “deliver outstanding client outcomes”.

He says the Koda model provides independent advice to wealthy families and not-for-profit organisations.

“We believe ownership models will continue to develop along the lines of the Koda professional model where a majority of the firm is owned by the partners,” he says.

He sees his firm as contrasting with other firms, some of which have been “bought out as product distribution plays or torn apart by bad culture”.

“Koda is left standing as the only independent Australian offering which operates at scale,” Tucker says. “We’ve had strong and consistent growth since our founding 10 years ago, and we are even more excited about the opportunity ahead of us.”

The lucky country

Tucker sees the business in Australia continuing to grow on the back of the growth of high net worth investors in the country.

“Australia is a relatively young country and is experiencing significant wealth transfer in large numbers for the first time,” he says.

“Australian families have been successful business owners and significant wealth has been created in property as well. We see this continuing and therefore the demand for independent private wealth advice will continue to grow.”

Tucker argues Australians prefer having advisers who are seen as independent as opposed to those backed by investment banks.

“We’ve seen investment banks enter and exit the space,” he says. “We believe the future will require firms to offer unconflicted advice.

“While this (advice from investment bank-backed firms) is an attractive option on paper, future HNW (high net worth individual) advice firms must be able to operate effectively as independent firms. Typically, investment banks have found that difficult.”

UBS, of course, would beg to differ, given that the Australian private wealth business of Credit Suisse is now back in the fold under the leadership of Michael Marr.

He argues his team benefits from being able to be part of Australia’s leading investment bank as well as the UBS markets business,

In the end, Viola says, the key to a successful advice business is being able to offer clients access to good-quality investments.

Part of this is being able to access investment opportunities for clients in private markets.

“There are only so many BHP shares you can buy for people with lots of money,” Viola says.

“You have to be able to generate better returns than what they (the clients) could do on their own.

“You can be the nicest guy in the world and learn your client’s dog’s name and which university their kids are going to and their favourite skiing spot, but at the end of the day, if you are not producing good investment outcomes over the medium term, they are going to work it out.

“You have to work hard for your clients to find good investment opportunities where you can add value.”