In the last six months, a growing number of large advisory practices have shown greater interest in putting formal corporate structures in place, Macquarie Relationship Banking national head of financial services and accounting Jamie Melville has said.
“More clients are utilising our expertise and are interested in how they can start and go about corporatising their advisory firms,” Melville told InvestorDaily.
It’s about practices introducing a more formal business structure, and where they have greater scale sometimes a board of directors, so that the business is not dependent on one principal or person, he said.
“It’s also an attractive model for the 50 and 60 year old practitioner, who would like to relinquish some responsibilities to another part equity owner while at the same time ensuring the business has longevity,” Melville said.
“The point of corporatising is really about improving the long term value of a firm and ensuring that its legacy lives on. It’s about culture, ethos, brand and scalability without compromising the business’ personal touch.”
Independent consultancy Business Health reported that it had noticed an increase in larger and more profitable advisory practices moving to more corporate structures as well, but said those that were introducing boards of directors tended to have ten or more staff.
“The average Australian advisory practice has around five or six staff and while they’ve shown interest in appointing external advisory boards and in some cases part equity owners as well, introducing directors hasn’t been part of the conversation,” Business Health partner Terry Bell told InvestorDaily.
Practices in most cases needed to be of a certain size and bringing in a certain amount of revenue to warrant corporatising, particularly if they wanted to introduce a board of directors, he said.
