Speaking to InvestorDaily, Paul Barrett, CEO of AZ NGA, highlighted the clear influx of global institutions into the Australian wealth management sector, but said this surge of investment will eventually dry up.
Earlier this month, AZ Next Generation Advisory (AZ NGA) announced it had secured a $345 million senior secured credit facility, led by global investment giant Barings, to support its growth strategy, following a $240 million investment from Oaktree Capital Management last year, which valued the company at $690 million.
“When we raised capital last year with Oaktree, there were a number of other players very keen to enter the sector,” Barrett said.
“And that’s what’s so hot. You only need to look at what’s happening in the Insignia situation to see that there’s quite a lot of demand by foreign investment companies for Australian wealth management assets. And I think that cycle will continue for a little while longer, but it won’t last forever.”
AZ NGA, he said, plans to fully leverage this opportunity while it lasts.
“Now is the time to be executing your growth plan,” Barrett said. “Business is cyclical … And right now, [wealth management] is a very hot sector, and it probably won’t be this hot again in our lifetimes.
“That’s the theme, that’s the thematic, it’s on now, we have to take action now in order to capitalise on that.”
Recent analysis from Ashurst revealed that private equity firms are very likely to continue to target the financial services sector in 2025, particularly wealth management, driven by growth potential and opportunities in digital transformation and consolidation.
Locally, the most prominent example of this has been Insignia, where three major firms initially vied for the company, with two now remaining in the race.
Peter Worn, joint managing director of Finura, predicted last month that the “great privatisation of wealth” will continue to gain momentum.
Speaking on a webinar, Worn said the interest received by Insignia and AZ NGA “should signal to a lot of people that Australian wealth management is a really great business to be in, that people want to put huge amounts of capital into for the future”.
“We have a lot of participants now looking to invest in financial planning businesses and there’s a lot of really good reasons why they want to do that.”
Alignment is key
Since it was established in 2014, AZ NGA has expanded its network of independently branded partner firms to more than 30 and collectively manages over $15 billion of assets under advice, as of August 2024.
Following Oaktree’s vote of confidence, which saw previous majority shareholder Azimut retain a strategic stake, AZ NGA announced plans to accelerate acquisition and integration activity to strengthen its position as the growth and succession partner of choice for financial advisory and accounting firms in Australia.
“With strong momentum to-date and an attractive pipeline of M&A opportunities, AZ NGA is strongly positioned for accelerated growth alongside Azimut and Oaktree,” Barrett said at the time.
Elaborating on AZ NGA’s choice of Oaktree, Barrett highlighted the strong alignment, emphasising that while many investors have the financial resources, Oaktree’s expertise in growing people-driven businesses and shared strategic values made them the perfect partner.
“The key reason is alignment,” he said.
“There’s a lot of people out there with deep pockets, particularly in the global investment and banking community, but when you talk to these companies, it’s pretty clear early in the conversation who truly understands the marketplace and who truly understands what we’re all trying to do, and these are people businesses.
“We certainly have ruled people out in the past who we felt had the money but didn’t have the alignment.”
Moving forward, AZ NGA – which provides a platform for SME financial advice and accounting firms to accelerate growth through acquisitions and integration – aims to use its $345 million funding facility to empower “ambitious SMEs” to accelerate their growth in ways they’ve never experienced before, fundamentally reshaping the value chain.
“Twenty years ago, advisers were at the bottom of the value chain, with fund managers and platforms above them. That’s now inverted, and the emergence of the advice platform has created this shift,” Barrett said, adding that the $345 million will play a key role in driving this transformation.
