Zurich Financial Services Australia (Zurich) has signed a deal with DKN Financial Group (DKN) that will give them access to 300 boutique practices across the country.
The alliance is part of DKN’s successful purchase agreement of the Zurich Australia-owned dealer group Lonsdale Financial Group (Lonsdale).
DKN announced late last week it will purchase Lonsdale as well as Zurich’s portfolio administration business, Wrap Account Limited (WAL). The transaction of both is said to be worth $120 million.
As part of the deal, Zurich will acquire a 31 per cent stake in DKN with both groups entering into a strategic marketing alliance that will see DKN exclusively promote Zurich life insurance and managed fund products to the small to mid sized dealer groups in Australia.
“From our point of view, DKN’s purchase is a win win situation for us,” a Zurich Australia spokesperson said.
“Not only did we sell these businesses, we’ve now got a bigger distribution network.
“We’ve now taken a 30 per cent plus equity stake [in DKN] which makes us the largest shareholder.”
Also under the deal, two senior Zurich executives, believed to be Zurich Financial Services chief executive David Smith and Zurich Financial Services chief financial officer Chris Powell, will join DKN’s board.
DKN chief executive Phil Butterworth said DKN plans to retain the Lonsdale brand and will incorporate the group into its practice solutions division.
Butterworth said the transaction will boost its financial planning practice number to 300, with some practices licensed as DKN and others under the Lonsdale licence.
“Mario [Modica, Lonsdale’s chief executive] will be the executive director of the division, reporting through to me,” Butterworth said.
“We want to leverage off the current business, we don’t want him to change he has been doing a fantastic job.”
Butterworth said the purchase of the WAL platform offers the DKN advisers’ two different types of BT badged pricing models.
He said over time the plan is that the DKN/Lonsdale advisers will move all their clients to the cheaper platform within WAL.
Commenting on the possibility of defections from Lonsdale advisers, Butterworth said there is little that can be done, as advisers have that option every day.
“The deal for the Lonsdale practice is that it provides an incentive to stick around,” he said.
“In terms of the wrap practice we need to get out there and see them and let them know of the additional services, and retain them as anyone needs to retain good clients.”
The acquisition of Lonsdale by DKN will be implemented through two Lonsdale schemes or arrangements. The transaction sees the creation of a significant financial services business with approximately $8.2 billion funds under advice.
It is currently expected that the schemes will be implemented by late October.
Key steps to implementation of the schemes include foreign investment review board approval, lodging scheme documents with ASIC, the first court hearing and the second court hearing.
