Boutique knocks back multi-million dollar takeover

Independently-owned adviser business and dealer group, Fitzpatricks, has rejected a rumoured multi-million dollar offer from a top-five ranked institution and instead has set in motion aggressive expansion plans.

The deal, which the Fitzpatrick’s board has been entertaining for the past 12 months, started as a concept to build an institutional dealership with an entrepreneurial flavour. But according to Scott Fitzpatrick as the deal got closer this concept fell apart and it became clear the two groups were culturally misaligned. “We felt we were being limited in our growth strategy, which is not conducive to our business model going forward,” Fitzpatrick said. “We believe an adviser business in our market space needs to be fee for service not product orientated. Selling products often means you have lost control of your income stream and all too often are acting on your own interests rather than your clients.” Fitzpatricks has built a specific advice model, called a strategic partner program, which project manages clients rather than sells to them. It is the second time Fitzpatricks has rejected the advances of an institutionally-owned dealer in the past 18 months, and while not altogether ruling out the idea of selling to a large dealer, the principals thought they had not finished building the business yet. “We are not ready to sell we are still in expansion mode,” Fitzpatrick said. “There is too much upside in what we are doing.” Fitzpatrick said the process of negotiating with a large institution had taught them a lot about where the value in the business lies, namely in its relationships, and the advisers had been kept in the loop throughout the process. The business is about 20 years old, and relative to the industry its advisers are quite young, on average aged in their mid 40s. The Fitzpatrick dealer group now has 12 practices and 25 advisers under its wing, with the aim to grow to about 25 practices. “We are interested in talking to advisers with about $50 to $100 million but have hit a brick wall,” he said. “For those that want to access higher net wealth clients, have less clients not more and be more profitable, we can get them to the next level with our model.” The Queensland-based dealer now has proper authority holders in Perth, Melbourne, Sydney, the Gold Coast, Brisbane and Adelaide, with Canberra, North Queensland and Newcastle nominated as targets for growth. The business started in 1987 as Scott Fitzpatrick’s adviser business under AMP, Financial Wisdom, and then Lonsdale. As well as being self-licensed it is now multi-faceted and includes Headspace, a coaching firm that teaches other advisers how Fitzpatricks does business, the dealer group, and a home-grown IMA. Fitpatricks’ advisers have an average account per client of $800,000 and all advisers charge a flat yearly fee which is paid monthly. Project management services are separated from investments fees.