Instos use client books to seed new practices

The large institutions are keen competitors in the buoyant market for client books, and they are using the same client books to seed new financial planning practices.

AMP has been seeking to buy back client books from AMP planners who no longer fit the planners’ profiles, according to AMP director of financial planning advice solutions Steve Helmich (pictured).

“The fact that we have undertaken this position of buying back partial client bases or partial registers has helped us grow planner numbers and start new practices,” he said. “We want to increase our advice footprint, but to start a new practice you need clients.”

MLC general manager of business development Peter Greenaway said institutions saw the value of the client books because they were essential to the success of their financial planner start-up programs. He said there was good demand for the MLC Advice Business School, as well as the systems and support the group could provide to new principals in the initial stages of establishing a business.

“But what the demand is really for, what makes the most sense, and what will determine the success of the business in the initial stages, is their ability to access clients — and that’s really where our focus is,” he said.

The market for client books has maintained strong momentum since the announcement of the Future of Financial Advice reforms. Market commentators noted the increase in advisory practices keen to sell off parcels of clients, which under a fee-for-service regime they felt they would not be able to service cost-effectively.

In August 2010, Kenyon Prendeville noted an 80 per cent increase in book sales over the previous year. Principal Alan Kenyon said based on the level of enquiry his company received last month that momentum would be maintained, supported by interest from the independently owned financial advice space as well as the institutions.

Kenyon said from the perspective of individual practices, picking up partial or complete client books was another way of creating scale without having to deal with the challenges of a complete business acquisition or merger.

“Some practices are picking up parcels of clients who may be inactive because they have the resources, systems and processes to service them,” he said.

Kenyon added that in the last year or so not much new business had been written, and therefore a lot of advisers were looking to use client books as a prospecting tool for new business.

Greenaway said that the debate about whether C and D client parcels would retain their value was more complicated than comparing what revenue they brought in now. Rather, one needed to consider the upside potential of the clients who had various financial needs that were previously not serviced, he said.