Amplifi expects more $2m to $20m acquisitions

Amplifi was created two years ago by Mint Asset Management to acquire advice businesses, but has since made only three purchases, the Sage and Totara advice businesses and Prosperity Partners' client book.

Last week, the company announced Amplifi's former chief executive Fred Ohlsson, which has previously held senior management roles at ANZ Bank, had stepped down from the role.

Amplifi and Mint chief executive Rebecca Thomas says the main obstacle to successful acquisitions has been that both bonds and equities markets crashed through 2022 leaving client portfolios down 20% or 30%.

“The advisers' view was that they didn't want to sell and leave their clients” while investment performance was languishing, and while that meant the prices of their businesses would be considerably lower than they would like.

“They didn't want to abandon those clients with whom they had deep relationships built over many, many years. That's been the main impediment to getting across the line,” Thomas says.

When Amplifi was created, the intention had been to acquire significantly larger businesses, but it missed out on both the Kiwi Wealth and Hobson Wealth businesses, she says.

“We thought Kiwi Wealth's valuation was too high” and it now appears that any larger acquisitions will be “too rich” for Amplifi.

It had been with the idea of large acquisitions in mind that Ohlsson had been recruited to run Amplifi.

However, the deals Amplifi has managed to make have been as a result of Thomas' relationships with the business owners, who had wanted to retire, rather than any connections Ohlsson has, she says.

Given that financial markets have recovered and client portfolios along with that improvement, business owners may be more inclined to sell now.

Thomas says any purchases are likely to be in the $2 million to $20 million range, rather than the $310 million price of Kiwi Wealth, which was sold to Fisher Funds in 2022.

The price Forsyth Barr paid for Hobston Wealth, which has more than $4 billion in funds under management and 35 advisers, hasn't been disclosed.

The Amplifi strategy isn't a vertical integration play and it won't be forcing clients into Mint funds, Thomas says.

Rather, the portfolios will continue to be managed independently. “We think we have a model that will appeal to advisers. We're not going to tell you what to buy and sell. We're not going to tell you what to own,” she said.

While Mint does offer some retail products, it remains primarily an institutional busines.

The vertical integration model incurs a lot of regulatory costs which are usually “sheeted home” the the clients. By not vertically integrating, Amplifi can avoid such costs, Thomas says.

While independently constructed portfolios may contain some managed funds, they also tend to include direct holdings of bonds and equities and so don't include those costs.

And that lower-cost model is what makes owning distribution businesses more attractive.

Clients of distribution businesses also tend to be more “sticky,” unlike institutional mandates which can shift to a new manager on one month's notice, she says.