Are multidisciplinary firms the way forward for advice businesses?

Speaking on a recent episode of the ifa Show, founder and director of Forte Asset Solutions, Stephen Prendeville, said the industry is trending more towards the creation of multidisciplinary firms, providing a variety of services in one business.

“I think with multiple firms, we’re also talking about multidiscipline houses as well. So you’ve got accounting, financial planning, risk, and then other specialist services, and there’s a lot more bringing in-house support,” he said.

Prendeville attributed this shift to the change in advice capabilities of accountants due to the 2019 royal commission leading to a need for outsourcing to service their clients.

“The reason why I think there’s been one, is when we have a look at the adviser exodus that happened around 2020 to 2022, a lot of those exiting were accountants that were trading under exemptions,” he said.

“They still had clients that had needs, they just could no longer provide advice to them. They can set up a self-managed super fund but they can’t advise on it.

“This is where, I think, there’s been a lot more joint venture (JV) activity or merging activity, and immediately what that does is change the valuations.”

Speaking on the benefits of multidisciplinary firms, Prendeville added that firms can also improve client retention and attraction through improving the service offerings.

“If you’ve got multiple disciplines, you’ve got multiple fences around the client. So, that’s both attracting and retaining clients. A lot more reason for them to be talking to their family and friends about the service delivery,” he said.

Explaining how the implementation of this business structure benefits firms, Prendeville explained that the increase of oversight provided by senior management allows them to understand inefficiencies in the business and enact change.

“With the multidisciplinary, what we’re seeing is multi-partner firms which, immediately from a valuer’s perspective, reduces key person risk. All of a sudden, there is division of labour and the appointment of general managers,” he said.

“All of a sudden, you’re getting a lot more stable at the top of any business. So, a lot more disciplines come in, a lot more data management, a lot more critiquing of how the business could be better.

“That becomes a self-fulfilling prophecy and they can grow. They’ve got balance sheets, they’ve got capital behind them, and they are [growing]. Where I’m seeing the greatest amount of growth is probably at the highest end of the market.”