The merged entity of Snowball Group (Snowball) and Shadforths Financial Group (Shadforths) will be well positioned to cope with Australia’s independent advisory sector in spite of it being affected by poor fund inflows and regulatory pressures, an analyst report has said.
An Evans and Partners analyst report said relative to its peer group, the merged Snowball and Shadforths entity will “emerge with a high quality revenue base and scale advantages” in terms both of absolute funds under administration (FUA) and average FUA per adviser.
The combined group will have $12.6 billion in funds under advice including $10 billion under administration and $3.1 billion under management, the report said.
Financial planning, wrap, administration and management fees will account for 75 per cent of sales, it said.
The report named the combined group’s nearest competitors as listed financial services firms Count Financial, DKN, and WHK Group.
“Count Financial and DKN’s business models focus on the “dealer services” segment which has historically enjoyed high margins but risks being disintermediated as third-party adviser groups face margin pressure,” the report said.
It said WHK’s business model has a stronger relationship with end clients and greater diversity with accounting but a more varied and “potentially less compliant/visible employee/partner model”.
“It also has less leverage to markets, somewhat of a blessing today, but multiples should reflect the point in the cycle for pure advisory businesses,” it said.
The report said the Snowball/Shadforth entity will be vertifically integrated across the value chain, have a predominantly salaried employee model, enjoy similar if not greater scale and a strong balance sheet.
A bidders and targets statement will be despatched to Shadforth shareholders on 6 June 2011.
